AGRICULTURAL DIVERSIFICATION IN VIETNAM

BACKGROUND

1. Global context

For the past few years, the world economy has gone through some significant changes. According to the World Bank (WB) report, the growth rate of high-income countries in the decade of 1990s has slowed down as compared to previous decades. In 2003, the growth rate of these countries went down even lower. Meanwhile, this trend seemed to be reversed in the low-income countries. In general, the growth rate of GDP in these countries has been rapidly increasing. The low-income countries in Asia had the highest growth rate in the period of 1981 – 1990 and 1991 – 2000, even when the rate was slightly lower in 2003.The lowest growth rate in the past decade was seen in Europe and Central Asia. In 1991 – 2000, countries in these regions had a negative growth.In recent years, the global trade in general and agricultural trade in particular has made great changes. The brightest spot was the trend of economic integration and globalization. Integration was the result of the gradual removal of trade barriers and better capital flow rotation. However, the process of integration and globalization also creates a lot of pressure in terms of competition, power transference and other social problems including poverty and inequality. During the recent decades, a vast number of developing courtiers opened their economies to the world outside. Import tariff in most of these countries has decreased overtime. The average tariff in the South Asia countries reduced from 65% in 1986 – 1990 to just over 30% in 1996 – 1998. Similarly, the African and Latin American countries have speeded up trade liberalization by tariff cutting.Although many developing countries chose to open their economies and embrace trade liberalization, they still faced the onset of difficulties such as protectionism in the high-income countries. The average tariff in high-income countries tends to be quite low (approximately 10% in Europe), these countries however still maintain very high protection with respect to those commodities which developing countries have comparative advantages such as agricultural products and other labor-intensive products. The protection in rich countries has deprived the poor countries of opportunities.An obvious trend in recent years revealed that the export share of manufactured products in low-income countries had increased slightly, while agricultural product export share has been decreasing, particularly in the past five years.Over the last ten years, agricultural trade has been affected by strong price fluctuation in the world markets. The prices of many agricultural products such as rice, coffee, tea, sugar and rubber have constantly fallen in the past five years. The price of Robusta coffee in the world market in 2003 was one third of that in early 1997. Similarly, price of sugar reduced sharply since 1995 after rapid increase from 1993. Other agricultural commodities markets have been depressed even more serious due to the price fall such as tea and cacao.

In the same way, the price of rice in the world market has also reduced significantly. The Thai 100% grade B has fallen to US$170 per tone in 2001 from US$350 per tone in 1996. The Thai A1-Super has dropped to US$ 140 per tone in 2001, by more than US$100 per tone lower than that in 1995.In the next coming years, according to the WB prediction, global economy will be growing but slowly. In the period of 2004-2005 developing countries continue to enjoy higher growth rate (3.7%) as compared to that in high-income countries (2.1%). In parallel with the growth of global economy, agricultural world market expect to recover. Price of some agricultural commodities such as natural rubber, coffee, rice will gradually increase in the next period. The fluctuation in agricultural market has affected strongly many economies in the world, especially exporting countries. Price reduction of rubber, coffee and other agricultural commodities created big problems for farmers in producing countries. To recover price of rubber, main rubber exporting countries including Thailand, Malaysia, Indonesia and Vietnam, later agreed to reduce their rubber areas. Similar to the case of coffee, the producing countries like Vietnam, Brazil will reduce coffee areas. Beside this, the agricultural diversification has also stimulated the process of resource allocation to activities of higher profitability, reduced risks for farmers and satisfied the diversified demand in the world market. 2. Countries context

During the last 15 years under “doi moi”, Vietnamese agriculture has made great achievements. The country GDP growth has been high and stable, with an average of 7.68 percent per year. Despite of relatively lower growth, the agriculture GDP has also increased annually at 4.26% in the period of 1991- 2001.The successively increasing in food production has allowed to secure the food provision for the whole country and also turned Vietnam from a chronically food-deficient country to the second largest rice exporter in the world, after Thailand. From 1990 to 2000, annual food production in Vietnam increased by more than 1 million tons and reached to its record of 34.4 million tons in 2000. The average per-capita food output, therefore, increased from 332 kg in 1990 to 443 kg in 2000.Owing to the policy reform encouraging the expansion of agricultural production, more efficient land allocation, promoting strong motivation of farmer households in decision making, the areas under industrial crops have also increased dramatically. In 2000, industrial crop areas (annual and perennial) in the whole country were expanded to over 2.2 million hectares, twice as high as that in 1990. The area of fruit tree was also obviously larger of about 541,000 hectares in 2000, nearly twice as high as that in 1990. Currently, some specialized cropping areas were set up in order to mobilize the regional advantages.The increase in agricultural output has not only met the domestic demand for agricultural products, but also created huge surplus for export. Currently, some Vietnamese exportable agricultural commodities have affirmed their positions in the regional and the world markets, such as rice, coffee, cashew, pepper and tea. Vietnamese agricultural export value in the past few years has increased rapidly. In 1990–2000, the agro-forestry exports in Vietnam grew fast at 14.7% annually and amounted to US$4.3 billion in 2000, making up 30% of the total country export value.

Due to the production development and enhancement of economic structure, the standard of living in both rural and urban areas in Vietnam has gradually improved. Per capita income/expenditure increased continuously, from VND 1936 thousands in 1993 to VND 3229 thousands in 20021. However, the income increase in urban areas is relatively faster. In period of 1993-1998, the urban per-capita expenditure increased at a rate of 9.9% annum, while it is only about 5.4% of annual growth found in rural areas. Furthermore, the income gap between rural and urban areas is also widening. In 1993, per capita expenditure in urban area is 1.8 times higher than that of rural areas. In 2002, however, this number reached 2.4 times Despite of numerous progresses over the past few years, the agricultural sector still remained with many disadvantages. The potential of Vietnam agriculture has not been fully realized yet. The adjustment of agricultural structure and the agricultural diversification were very sluggish, not satisfying the growing demand of domestic, regional and the world markets. Some products have not met the international standards, losing its competitiveness. Market information is limited and has not helped producers in making decision. The production planning seems to be not really sensible, resulting in a conflict between processing capacity and raw input producing areas.

Moreover, the adoption of agricultural improved technology was still poor. Animal and crop productivity in Vietnam was much lower than the average level in the region as well as in the world. Backward processing and preservation technologies have affected the quality of agricultural products and limited the competitiveness of Vietnamese agro-products in the international markets, especially amid the era of economic integration and trade liberalization.As mentioned above, over the past few years, the living standard of people in both rural and urban areas has been improved. The income of most farmers was, however, still low and the differentiation between rich and poor was greater. To improve the average income and standard of living of rural inhabitants, the adjustment of economic structure, particularly in agricultural sector is always in the top of priorities. In recent years, various changes in economic structure have been made. As a result, agricultural production has gained significant progress. Nevertheless, the adjustment of economic structure and the agricultural diversification in regions have still showed with many limitations and have not been taken with full potential in each region. As the result, suitable policy supports are required to promote the production advantages, meet the market demand and ensure effective cooperation between processing and consuming.With great efforts focusing on the hunger elimination and poverty reduction, Vietnam has achieved considerable successes in this field. The poverty rate in Vietnam has fallen dramatically from 58% in 1993 to 37.4% in 1998 and to only 29% in 2002. However, it should be noted that the pace of poverty reduction in Vietnam has been slightly falling down year by year, from an average of 4% per year in 1993 – 1998 to only 2% per year in 1998 – 2002. Besides this, there is still a large gap between rural and urban, lowland and highland standards. According to data from a household living standard survey in Vietnam, 1993, the urban poverty rate was 25% while the rural poverty rate was 66.4%, and the poverty rate fell to 6% and 36% in the urban and rural areas, respectively.

1 GSO, Statistical yearbook 2001, Statistical publishing house, 2002.

However, in Vietnam, the level of poverty varies significantly among regions. In general, the Central Highland is the poorest region, followed by the Northwest and the North Central coast. The poverty rate in the two deltas is quite high, but it accounts for only a half of the poorest regions. The study carried out by the International Food Policy Research Institute (IFPRI) shows that the two deltas have the highest number of the poor in Vietnam. This means that the hunger elimination and poverty reduction policies should focus on the lowland regions.For achieving further successes in the poverty reduction, the Vietnam Government has carried out various programs and policies on areas such as land, science technology, credit, job, and direct support. These efforts were particularly prominent in Programs 135, 133, 120 and 137.Despite the successes in agricultural production, hunger elimination and poverty reduction, the Vietnam rural economy suffered disadvantages and difficulties. Firstly, the rural income was still very low at only 200 USD per capita (in 2002)2. Secondly, it is very hard to find a stable job in rural areas. According to a survey by GSO, the rate of spare time in rural areas was at over 70%3. In fact, in the off-season, rural labors often worked on non-agricultural activities or went to urban areas to earn money. Thirdly, environment pollution was far more serious with increased uncontrolled forest destruction, overuse of pesticides and fertilizer, scarce fresh water sources and increased waste from manufacturing factories. All of these factors placed a severe pressure on the rural environment and seriously affected the sustainability of agricultural production. One problem that had a direct impact on production was the instability of agricultural product prices. In recent years, a large number of export commodity prices fell sharply due to the lower trend in the agricultural world market. Coffee prices fell to only one third compared to 1997. Solutions for such problems, especially objective factors such as the fluctuation price in the world market were not effective. Agricultural diversification, the target that Vietnam has still been pursuing over the past few years, can help farmers limit risks from production, raise commercialization and improve income.

AGRICULTURAL DIVERSIFICATION IN VIETNAM OVER THE LAST DECADE

1. Definition of Diversification

The concept of diversification conveys different meaning to different people at different levels. At the national level, it generally conveys a movement of resources, especially labor, out of agriculture to industry and services, a sort of structural transformation. Within agriculture, however, diversification is considered as a shift of resources from one crop (or livestock) to a larger mix of crops and livestock, keeping in view the varying nature of risks and expected returns from each crop/livestock activity, and adjusting it in such a way that it leads to optimum portfolio of income4. 2 Qouted from IFPRI, Income diversification and poverty reduction in North Uplands of Vietnam, 2002.3 GSO, Vietnam living standards survey 1997-1998, Statistical Publishing House, 20004 P.K. Joshi, Ashok Gulati, Pratap S. Birthal, and Laxmi Tewari, Agriculture diversification in south asia: patterns, determinants, and policy implications, 2003

This definition of diversification needs to be distinguished from movement of resources from low value commodity mix (crops and livestock) to a high value commodity mix (crops and livestock), as it may often be reflected in an increasing degree of specialization (reducing diversity) to high value activities, especially at the farm level. And it is precisely this movement to high value agriculture, which is of great interest to us in this paper because it indicates yet another way to augment income, besides the traditional ways of increasing yield, area or cropping intensity. Thus, based on these various definitions, the nature of diversification can be broadly described as (i) a shift of resources from farm to non-farm activities, (ii) use of resources in a larger mix of diverse and complementary activities within agriculture and (iii) a movement of resources from low value agriculture (crops and livestock) to high value agriculture Diversification is sometimes defined as the process of switching from subsistence production of staple crops to commercial production of a wider range of agricultural commodities and to non-farm activities. Beside that, One definition of income diversification relates to the number of income sources and the balance among them. The Simpson index of diversity is widely used in biology to measure the bio-diversity of an eco-system. The Simpson index of diversity is defined as: where Pi is the proportion of organisms that are classified in species i. The Simpson index of diversity can also be interpreted as the probability that two randomly selected organisms will be from the same species5. We can use the Simpson index to compare crop diversification in several regions within the country. Here, Pi is the proportion of crop i in total area. The value of SID always falls between 0 and 1. If there is just one crop, P1=1, so SID=0. As the number of crops increases, the shares (P i) decline, as does the sum of the squared shares, so that SID approaches 1. If there are k crops, then SID falls between zero and 1-1/k6. This index also is commonly used to measure the crop diversification.

2. Rationale of Diversification

Maintaining sustainable growth of agricultural and rural income is agued to require commodity intensification and diversification. Intensification would increase efficiency of production, usually through new technologies. Diversification as mentioned above implies the production of a wider array of commodities, particularly higher value commodities – given other priority policies, such as food security. Intensification could be seen as a prerequisite to diversification. Diversification is sometimes interpreted as import substitution in order to save, rather than to earns, foreign exchange. However, commodities are typically imported because doing so is more efficient than domestic production.In selecting tradable commodities for diversification, or commodities for expanded production, it is important to note that prices are more stable for those commodities traded in large volume. Therefore, if other things were equal, diversification into commodities which have large traded volumes would likely experience less price 5 The Simpson Index is closely related to the Hirschman-Hirfendal index of concentration. Specifically, SID = 1-HH/10000. The Simpson Index is also related to the family of generalized entropy indices. When the generalized entropy index parameter β=1, it is equivalent to 1-SID. 6 IFPRI, Income diversification in North Uplands of Vietnam, 2002.

volatility. Unfortunately, other things are rarely equal and commodities traded in large volume are often low value commodities.As Vietnamese incomes increase, the domestic market will become more demand driven. Consumers will shift toward higher quality items as well as a wider variety of foods – including high value commodities such as fruits/vegetables and some animal products. Thus, as mentioned above diversification is widely defined as a process of shifting from low-value crops to higher-value crops and non-crop activities. However, this type of diversification is more risky due to the high price volatility in the high-value commodity markets and therefore is a difficult option, especially for the poor farmers. Diversification into high-value crops and activities is inhibited by a range of factors such as lack of liquidity and access to credit; lack of information, skills and education, lack of necessary land and labor resources or poor infrastructure, etc.Given the well-known benefits of specialization, why do farmer households would like to shift into diverse agricultural production? A number of reasons make farmers diversify their activities. At least six factors can be identified:First, diversification can be a strategy to reduce risk. Risk management may help explain the diversification within on-farm activities as well as the diversification from agricultural production into non-farm activities. To reduce risk through diversifying productive activities, farmer generally has to sacrifice his average income. Thus, diversification is likely to occur when households are particularly risk averse and when income sources are highly variable. This seems to be consistent with the case of Vietnam where poor farmers are more likely to have diverse activities than richer households. In addition, poor farmers in Vietnam have to diversify not only because they are typically risk-averse, but also because they do not have enough land resource to earn living for their relatively large family. The underemployment is another explanations for agricultural diversification in Vietnam. The second motivation for diversification is that there may be positive complimentary effects between different activities that make total income from combining activities is greater than from single one. It is very common practice when farmers combine livestock with crop production to take full use of by-products. Third, diversification may be useful as an adaptation to poorly-functioning markets. Says, if the plot of land allocated to a household is too small to fully occupy its family labor, one solution could be to rent or purchase additional land. Though the farmer could afford to buy some more land, but if land markets do not exist, then the only way is to use his “surplus” family labor in non-farm enterprises or wage labor even if the return is lower. Alternatively, if credit markets do not operate efficiently and a households has a cash constraint, it may use non-farm activities to earn cash to pay for agricultural inputs. The fourth motivation for diversification is to optimize the family labor occupation by combining different activities with different seasonal peaks. This also help explain non-farm activities during off-season or wage labor during the harvest time of major cash crop. Fifth, heterogeneity in the skills or employment opportunities of household members can motivate the household to diversify. Finally, diversification may be motivated by the diverse consumption needs and high transaction costs in purchasing consumer goods. It seems to be a common practice in isolated areas where selling or buying goods are costly and self-sufficiency is the most sensible way for isolated marginal areas.

3. Agricultural diversification in Vietnam in the last decade

The Vietnamese economy has diversified away from agriculture over the last decade. Agricultural growth has been strong by international standards, but not as strong as that of the rest of the economy. Extended agricultural GDP share in total GDP was down from 32% in 1990 to 26.2% in 1995 and to only 23.2% in 2000. Meanwhile, industry and construction shares has increased noticeably, from 25.2% in 1990 to 29.9% in 1995 and to 35.4% in 2000Agricultural GDP share in total GDP has reduced, but the labor rate in the agricultural sector was mostly unchanged at 70%. This shows the reduction in agricultural productivity. Labor surplus, lacking in non-agricultural work, slow economic structure change combined to reduce agricultural productivity.In extended- agricultural sector, there is also changes between sector. Over past decade, share of agriculture and forestry sector in gross value tended to reduce. Share of agriculture in extended agriculture reduce from 82.5% in 1990 to 78.3% in 2002. Similarly, percentage of forestry sector down from 6.6% to 3.9%. By contrast, the share of aquaculture increased from 11% in 1990 to nearly 18% in 2002. Recently, aquaculture in Vietnam developed rapidly and contributed remarkably to total export value (about 2 billion USD in 2002). To support aquaculture development, Vietnam allow farmer to shift some low yield rice lands to produce aquaculture product such as shrimp, fishes. This is good direction which helps farmers use resource more efficiently and increase their income.In the agriculture, diversification from cultivation to livestock or service was not comprehensive. For the past ten years, cultivation sector has made of 78 – 80% of total agricultural production value. In contrast, livestock, a key economic industry for over 20 years with a lot of investment policies related to breed, feed, infrastructure,… accounted for only 18 – 20% of agricultural production value. In the near future, with further investments, Vietnam expects to raise the livestock share in total agricultural production to 30 – 35%. However, this goal will be hard to reach.Diversification within sub-crop sector

Even the stagnant transference among industries, cultivation sector has made significant changes over current years, with areas of perennial and annual crops (except rice) has risen sharply. In 1996 – 2000, the perennial crop areas showed very high growth rate at 9.7% per year on average. The main reasons were an increase in industrial perennial crops areas including coffee, rubber, cashew and increase in fruit tree areas such as longan, lychee, mango, citrus and so on. In 1996 – 2000, industrial perennial crop areas raised at average of 92% per year, fruit tree areas rose at 9.4% per year in average.With strong expansion of industrial trees such as coffee, rubber, pepper and fruit trees, the perennial crop areas has increased constantly, from 10.4% in 1990 to 12.1% in 1995 and up to 16.2% in 2000 in total crop areas.On the other hand, the annual crop area share has dropped due to some policies which encourage structural changes, crop diversification to help households develop higher profit non-food crops. In 1990, the annual crop area share was 89.6%, but it dropped to

83.4% in 2000. In addition, owing to partly changing of low yield rice areas to value added crops and aquaculture, rice area has reduced since 2000. According to the latest report by GSO, rice area in 2002 was about 7,485 thousand hectares, 300,000 hectares lower than in 2000. Meanwhile, the food crops and vegetable area has risen. Presently, a number of land areas moved to cultivate high value crops such as tomato, cabbage, kohlrabi, green bean and flower as well, which gain 5–10 times higher value than rice. Beside enhancing fishery activities and lifting some rice area to aqua cultural production, the aqua cultural export value in 2001 has risen by over 20% to US$ 1.8 billion compared to 2000.In the process of crop production diversification, Vietnam set up specialized zones including coffee and rubber in the Central Highland and the Southeast, tea in the North Upland and Lam Dong province, sugarcane in Central Coast and Southeast, fruit tree in some provinces in the Mekong Delta (longan, rambutan in Tien Giang) and in some provinces in the Red River Delta (lychee in Hai Duong, longan in Hung Yen), …Vietnam has diversified agriculture production through focusing on commercial production, strengthening crop structure lifting from rice monoculture. In past decade, agricultural production value has risen rapidly and stably. In 1990 – 2001, the average increase of agricultural production value was 5.8% in which, the crop value increased by 5.85% per year in average and livestock value rose by 5.9% per year.Due to crop diversification and increased industrial and fruit area, industrial value share in total cultivation value has risen significantly. In 2001, industrial crop value share in total cultivation value was up to 25%, higher than 14% in 1985 and 18% in 1995. While, food crop value share in total cultivation value was down to 60% in 2001 from nearly 70% in 1985.Over the past ten years, area of perennial industrial crops such as rubber, coffee, cashew and tea has continuously increased. In the period of 1990 – 2000, pepper area rose by 13% per year in average to 24.5 thousand hectares in 2000. Cashew area rose by 17.5% per year in average to 191.8 thousand hectares in the same period. Coffee was the highest growth, at average of 25% per year in 1990–2000 to 561 thousand hectares in 2000. With such a strong development, Vietnam is now the top Robusta coffee exporter and black pepper in the world; the third largest rubber exporter and the seventh largest tea exporter in the world.Increased agricultural output is not only meeting the demand for domestic agricultural products, but also for export. Some of Vietnamese agricultural products affirm their role in the regional and international markets such as rice, coffee, cashew, pepper and tea. Agricultural export value in Vietnam for the past years has increased strongly. In 1990 – 2001, the agro, forestry and fishery export rose by average of 16.8% per year to US$ 5 billion in 2001, making of over 33% of total export value all over the country.We can study the transition process in cultivation based on the average tree in one household. IFPRI’s researcher calculated the number of trees by household groups in total of 45 trees in the three household living standard surveys data (except for non-agricultural households), with 5–6 kinds of tree per household. Households in the Southeast and the Mekong Delta had the lowest average tree. The average tree per household in the two regions has also reduced. For example, in 2002, one household in the Mekong Delta planted 2,6 kinds of trees. This shows the specialization and reflects the diversification trend of income sources among regions.

Table 7. Crop diversification by regions in 1993, 1998 and 2002

RegionNumber of

crops in1993

Number of crops in

1998

Number of crops in2002

Northern Upland 8.02 8.44 8.17Red River Delta 6 6.22 4.7North Central Coast 5.77 7.77 6.6South Central Coast 3.98 4.23 3.56Central Highland 5.15 4.71 6.5South East 3.29 4.1 3.04Mekong Delta 4.27 3.29 2.58Total 5.55 6 5.06Source: IFPRI, Income diversification and poverty reduction in Northern Upland, 2003

Diversification within livestock sector

Although in agricultural sector, livestock just account for nearly 20.5 of total value and this rate is not change over past decade. However, within livestock sector, there is still diversification and development. Over past decade, the Vietnam livestock sector has also achieved great changes. In 1990 – 2002, pigs rose by 5.5% per year in average, poultry rose by 6.73% per year, cows rose by 2.27% per year. Particularly, buffalo has dropped since 1990, with an average of 0.11% per year. In the past six years (1997 – 2002), the average increase in pig heads was 5.39% per year, lower than 5.61% per year in early 1990s.

Table 8. Number of poultry and cattle heads, 1990-2002

CategoryNumber in

2002 (Thousand of

heads

Growth rate (%)1990-1996 1997-2002 1990-2002

Pig 23 169.5 5.61 5.39 5.50Poultry 233287 5.96 7.50 6.73Buffalo 2814.452 0.58 -0.79 -0.11Cattle 4062.966 3.37 1.17 2.27Source: Estimation based on data from GSO

Similarly, the average increase in cattle and buffalo heads in the past five years has also gradually reduced. In 1997–2002, number of cattle heads rose by only 1.17% per year in average, lower than the average of 3.37% per year in 1990 – 1996. But, poultry herds still rose at average of 7.5% per year, higher than the average of 5.58% per year in early

1990s. This means poultry production has development rapidly in Vietnam and, chicken raising by free-range mode was applied widely in many households.Noticeably, in 2002, although Vietnam faced many difficulties on export markets and domestic consumption, livestock sector still made great progresses. According to report by GSO, Vietnam held 23.16 million of pigs in October 1 st 2002, 1.369 million of pigs higher than the same period in 2001; poultry rose by 15 million of heads to 223.28 million of heads; cow rose by 163.3 thousand of heads to 4.062 million of heads.With the increase in heads, pig live-weight output has risen constantly for the past years. In 2002, Vietnam pig live-weight output was about 1.65 million of tons, chicken live-weight was 338.4 thousand of tons and cattle live-weight was over 150 thousand of tons.However, in animal structure, pigs was the main animal over the past years and has risen year by year. Pig live-weight share in total main animal live-weight (including pig, poultry, cattle and buffalo) increased from 74.6% in 1990 to 77% in 2000. Poultry live-weight output, mainly chicken, was mostly unchanged, ranged from 15% to 16% of total livestock output in Vietnam.Because of impact of mechanization, the number of buffalo raised in farmer households has reduced. In addition, the demand for carabeef was not strong also leading to reduction in carabeef share in total live-weight output, from 4.3% in 1990 to 2.4% in 2002.Although animal herd structure and meat output has been nearly unchanged, the farming size and structure of breeding herds has made big changes. The number of household raising cross-breeding and exotic breeds has been obviously higher. Many pig farms for export has been set up, with a lot of chicken farms raising thousands of chickens or dairy cow farms for milk production. Presently, pig farms made of nearly 10% total meat output. This shows the industrial livestock productioin has developed in Vietnam even the rate was still small.In recent years, milk production has been focused on and invested in by the central government, together with the development of meat production. The development of dairy cow production was with the aim of supplying fresh milk to domestic demand, raw material to processing factories and replacing powder milk imported annually. In 2000, the domestic fresh milk production of the whole country was at about 50,000 tons. However, imported milk still accounted for more than 90% of the total domestic demand. Presently, cow production is more and more profitable. Vietnam has set up plans to produce 500,000 tons of fresh milk by the year 2010, accounting for 38% of the total domestic demand. Dairy cow development in Vietnam is potential, but the main constraint now is that the industry is lacking in good breeds, pasture area and capital to intensive invest in livestock production. In addition to this, raising some other animal such as sheep, goat, tortoise, python, ostrich,… has been strongly developed. Markets for these products are large, with high potential.For recent years, Vietnam has tried to promote livestock production with a view to bring livestock to become a key industry in the rural income diversification. However, livestock just accounted for approximately 20% of total agricultural production value. The Vietnam livestock was in face of a lot of difficulties. Firstly, meat production cost is very high, mainly due to feed high price. This results in high price of meat and partly make meat product of Vietnam low competitive. Secondly, livestock productivity is still low. This relates closely to traditional production pattern of household in Vietnam and

low adoption of improvement breedings. Thirdly, processing technology is not still developed well. Material provision for processing is not stable. And another problem of livestock sector is poor sanitary codition and animal healthcare. By studying the diversification in livestock sector, the diversification mostly developed extensively, growth was mainly based on the increase in number animal heads rather than breakthrough in productivity and genetic technology.

Diversification as commercialization

As mentioned earlier, diversification is sometimes defined as the process of switching from food crops for own consumption to producing goods and services for sale. services as divided by the gross value of farm and non-farm production. In general, rural households are becoming more commercialized over time. According to calculation of IFPRI based on Vietnam household living standard survey 2002, the marketed share of crop production in the rural Northern Uplands has increased from 22 percent in 1993 to 33 percent in 2002 (though all of this increase occurred in the 1993-98 period). For the country as a whole, the share rose from 40 percent in 1993 to 61 percent in 2002. The fact that the marketed share of crop output in the Central Highlands fell between 1998 and 2002 may reflect the drop in the world prices of coffee, reducing the value of sales relative to subsistence food crop production Rural households in the Northern Uplands sell a relatively small portion of their crop output, just 33 percent in value terms based on the 2002 VHLSS. The commercial share of crop production in the Northern Uplands is similar to the share in the Red River Delta and the North Central Coast. In contrast, the marketed share of crop production is over 70 percent in the Central Highlands, the Southeast, and the Mekong Delta7. Because non-crop agricultural production (livestock, aquaculture, and forestry) and non-farm income tend to be more commercial, the marketed share of agricultural output and total income is almost always greater than the marketed share of crop output. Thus, about half the agricultural output of the rural Northern Uplands is marketed and two-thirds of total income is in the form of cash, according to the 2002 VHLSS. The southern regions tend to be even more commercially oriented. About 85 percent of the agricultural output of the Southeast and Mekong Delta is marketed, as is 90 percent of the income in these regions.

Table 9. Measures of commercialization by region in 1993, 1998 and 2002Year and Region Share of output that is sold

Crop output Agricultural output Total income (percent) (percent) (percent)

1993Northern Uplands 22 36 68Red River Delta 23 39 81North Central Coast 22 37 74

7 These percentages are calculated as the sum of sales divided by the sum of output, giving greater weight to households with greater output. If the percentage is calculated as the average of the household-level percentages, the marketed share is smaller. For example, the marketed share of crop production in Vietnam in 2002 would be 43 percent using this method of calculation, rather than 61 percent as reported in the table.

South Central Coast 23 39 85Central Highlands 78 77 92Southeast 65 69 93Mekong River Delta 56 59 88Total 40 48 841998Northern Uplands 33 44 75Red River Delta 29 45 88North Central Coast 30 44 80South Central Coast 46 55 86Central Highlands 78 78 88Southeast 77 79 95Mekong River Delta 74 74 91Total 54 59 872002Northern Uplands 33 50 69Red River Delta 34 62 83North Central Coast 39 64 83South Central Coast 54 74 91Central Highlands 73 72 79Southeast 89 84 89Mekong River Delta 84 85 91Total 61 70 83

Looking at the patterns of commercialization across income categories, it is evident that commercialization is higher among higher income rural households. For example, the share of crop production that is commercialized rises from 29 percent among the poorest rural households to 56 percent among the highest income category, according to the 2002 VHLSS.

Household income diversification

The economic structure change and agricultural diversification has made big changes not only in household income but also in share of income sources of households. Through studying the income structure of rural households for over ten years, agricultural production was always the key source. Income share from agro-forestry activities of household accounted for 60% of total income. Meanwhile, income from non-agricultural activities has fallen for the past five years, from 18% in 1998 to only 9% in 2002. Income from salary has risen slightly. It reflects the results of rural industrialization and creating jobs to raise non-agricultural income for rural households.In agriculture, income share from cultivation has slightly dropped, from 47% in 1993 to 46% in 1998 and to only 38% in 2002. Otherwise, income from livestock has fluctuated, with an reduction in 1993 – 1998, but has risen again in 1998 – 2002.

Table 10 : Household income by sources, 1993-2002Income % of income

1993 1998 2002 1993 1998 2002000 dongs/household/year %

Cultivation 3249 5065 4923 47 46 38Livestock 785 1097 1630 11 10 13Aquaculture 214 310 243 3 3 2Forestry 137 380 1201 2 3 9Non-agriculture 1309 1941 1205 19 18 9Salary, wages 539 982 1932 8 9 15Subsidies 680 1146 1448 10 10 11Others 14 64 220 0 1 2Total 6928 10985 12803 100 100 100

Source: IFPRI, Income diversification and poverty reduction in Northern Upland, 2003

The economic structure transference and business activities of households has made income sources changed. According to household living standard survey in 1993, 1998 and 2002, the average number of sources mostly unchanged in 1993 – 1998, with four sources of income, but from 1998 to 2002, this number increased to 4.67 sources in average. This explains that, economic development has created opportunities to members of households more and more.The changing of income sources was unequal among regions. In 1993, a household in the Northern Upland had 4.43 income sources, 4.53 sources in 1998 and 4.94 sources in 2002. In other regions as the Red River Delta and the North Central Coast, the number of income sources has reduced since 1998 – 2002 because household specialized in business activities.Comparing the indicators across regions, it is interesting to note that the income sources of households in the Northern Uplands are more diverse than in any other region. This is true whether we measure diversity by the number of income sources, by the Simpson Index of Diversity, or by the Shannon-Weaver index. The least diverse livelihood patterns are found in the Southeast. Given that the Northern Uplands is the poorest region in Vietnam and the Southeast is the most urbanized and the least poor, these results are consistent with the idea that diverse rural incomes are associated with poor households that diversify in order to reduce risks associated with fluctuations in income from any given source.

Table 11. Measures of diversity in income sources in rural areas by region in 1993, 1998 and 2002

Year and region Number of income sources

Simpson diversity index

1993Northern Uplands 4.43 0.49Red River Delta 4.16 0.48North Central Coast 3.57 0.45

South Central Coast 3.74 0.40Central Highlands 3.41 0.31Southeast 3.36 0.37Mekong River Delta 4.31 0.43 Total 4.02 0.441998Northern Uplands 4.53 0.49Red River Delta 4.50 0.49North Central Coast 4.82 0.52South Central Coast 4.08 0.47Central Highlands 3.72 0.36Southeast 3.92 0.39Mekong River Delta 4.30 0.40 Total 4.41 0.462002Northern Uplands 4.94 0.59Red River Delta 4.37 0.56North Central Coast 4.64 0.58South Central Coast 4.47 0.53Central Highlands 5.24 0.52Southeast 4.33 0.47Mekong River Delta 4.90 0.51 Total 4.67 0.55Source: IFPRI, Income diversification and poverty reduction in Northern Upland, 2003

By studying the number of income sources, in the low-income regions as the Northern Upland, the Central Highland, the Mekong Delta and the North Central, the average of income sources was higher. The reason is people in these regions did a lot of work to earn money, and some poor households had to diversify to limit the risks from fluctuation.Diversification among regions

For the past years, agricultural diversification among regions has been implemented by various directions and based on advantages of each region and each province. By studying economic structure in regions, the agriculture, forestry and fishery share in total regional production value was lower followed by the general trend in the economy. The agriculture, forestry and fishery share in total Northern Upland economic value reduced from 45.4% in 1995 to 39.5% in 2000. Similarly, the agriculture, forestry and fishery share in total Red river delta fell to 24.7% in 2000 from 32.2% in 1995.In contrast, GDP share of industrial and construction sector in regions (except the Central Highland) rose in the period of 1995–2000. The Southeast region with a lot of industrial zones, its share in total regional economic value was relatively high, at 56.7% in 2000 from 44.4% in 1995.

Table 12. Structure of economic sectors by regions and economic zones (%)Region 1995 2000

Agri, forestry

and fishery

Industry and

construction Service

Agri, forestry

and fishery

Industry and

construction Service

Northern Uplands 45.4 22 32.5 39.5 25.1 35.4Red River Delta 32.3 25.4 42.2 24.7 32.3 43.1North Central Coast 46.4 17.2 36.4 40.8 22.5 36.7South Central Coast 41.7 21.1 37.2 35.8 34.2 30Central Highland 62.1 14.8 23.1 58.9 14.8 26.3South East 9.8 44.4 45.8 6.8 56.7 36.5Mekong Delta 61.7 14.2 24.1 54.1 17.2 28.7

Source: Nguyễn Văn Chỉnh, Situation of structural change in 7 region in Vietnam, 2002

In the agricultural structure, diversification between agriculture, forestry and aquaculture was not as obvious as the structure lifting among economic sectors. In the Northern Upland, agricultural structure show the lifting by reduction in agriculture share, increase in forestry and aquaculture was both stagnant. The South Central and the Mekong Delta show the clearest trend. The aquacultural share in the South Central rose from 25.95% in 1995 to 35.2% in 2000. Equally, the aquacultural share in the Mekong Delta also rose from 20.2% in 2000 to over 25% in 2000.

Table 13. Structure in production value of agriculture, forestry and aquaculture by regions (%)

Region1995 2000

Agriculture ForestryAquacul

tureAgricult

ureForestr

yAquacul

tureNorthern Uplands 80.4 16.8 2.7 80.2 17 2.8Red River Delta 94.1 1.7 4.2 93.4 1.3 5.4North Central Coast 79.4 11.9 8.7 80.5 9.2 10.3South Central Coast 68.2 5.9 25.9 61.1 3.6 35.2Central Highland 91.6 7.3 1.1 94.3 4.3 1.3South East 84 2.7 13.3 86.6 2.3 11Mekong Delta 78.3 1.5 20.2 73.5 1.4 25.1

Source: Nguyễn Văn Chỉnh, Situation of animal structure transference in 7 ecnomic zones, 2002

Over the past years, the structural change and agricultural diversification has established specialied zones with various products which represent the comparative advantages in the region. The Central Highland is the biggest perennial industrial crop region in Vietnam, with main products such as coffee, rubber, pepper and cashew. Coffee area in the Central Highland now makes of more than 60% of total area, especially coffee area in Dak Lak accounts for 50%. Rubber area in the Central Highland is over 90,000 hectares, accounting for 21.9% of total area in Vietnam.The Red River Delta and the Mekong Delta are still “rice bowls” of Vietnam. Rice area in the Mekong Delta makes of over 50% of national area and over 90% of total rice

export. However, fruit and aquacultural products have been also strongly developing for recent years in the Mekong Delta. Fruit tree area in the Mekong Delta now is more than 200,000 hectares, accounting for over 40% of national fruit tree areas.Beside rice, livestock sector plays an important role in the Red River Delta. In 2000, the number of pigs in the Red River Delta was nearly 5.4 million of heads, making of 27% of national pig herds. In the past five years, pig farming in the Red River Delta has been developed constantly, with an average growth of 8.58% per year, higher than 6.47% per year in the first half of 1990s. Moreover, the crop diversification has expanded into fruit tree, vegetable and bean. Fruit tree area increased from 35,000 hectares to nearly 60,000 hectares in 2001, with average growth of 5.2% per year. Many out-of-town regions in Hanoi and some neighbor provinces as Hai Duong, Ha Tay has developed vegetable production and has gain much higher profit than rice farming in the past. Meanwhile, the Red River Delta has faced many problems in the economic structure transference due to low land per capita (was only 556 m2 per capital), while has the highest population density in the country at 1182 people per km2. In this situation, a lot of villages has improved and developed traditional jobs like pottery, iron, handicraft,… This is considered as an effective way that needed to support by the Government.The Northern Upland is also one of poorest regions in Vietnam. The average income per capita in rural in 2002 was only 2723 thousands dongs per year. Over the past years, the Northern Upland has enhanced the crop diversification. People in many locations has lifted rice areas to fruit tree and vegetable which give higher value or higher sale. Fruit tree area has rapidly increased from 21.9 thousand hectares in 1990 to 118.7 thousand hectares in 2000. Some fruits including longan (Son La), lychee (Luc Ngan), plum (Son La), apricot and orange (Ha Giang)… has been developing and it will bring considerable profit in raising the household income if stable outputs are available. Tea is still a main perennial industrial tree in the region, with tea area makes of nearly 60% of national area. Coffee was planting here, but coffee area was still small. Among food crops except rice, corn has been strongly developed. Many hybrid corn was applied widely in provinces in the regions and gave high results in the poverty reduction and improve the rural income. Being a mountainous region, forestry was quite important industry in the Northern Upland. Developing perennial trees in a large area of virgin mountainous land (about over 3 million of hectares) needed to expand. Thus, it is necessary to further research to plant more perennial trees in the next years to fully exploit the region’s potential and increase household income in one hand; and to protect the ecological environment on the other hand. Mr. Nguyen Cong Tan, former Vice President of Vietnam) said, some oil trees are suitable with the Northern Upland.The Southeast is the most developed economic region in Vietnam. In the past few years, industry and construction in the region has developed remarkably, but agriculture has also achieved some noticeable progresses, both in scale and commercialization level. Together main industrial crops as coffee (accounting for 34% of total area), rubber (at over 284 thousand hectares, accounting for 70% of total area), pepper (area was at 15 thousand hectares, accounting for 60% of total area). Livestock in the Southeast has been also expanded for recent years, with an average growth of 8.76% per year in 1990 – 2001. Even with only 10% of national pigs and poultry, breeding farm size was very big, mostly focused on industrial livestock.

Among others, the North Central Coast is a region with diversified natural conditions, included mountain, midland, lowland and coast. Agriculture was the main sector in the region. For the past years, it has carried out agricultural production transference to improve the economic effects as well as exploiting its potential. Corn has been relatively developed, with area rose from 64,000 hectares in 1995 to 93,000 hectares in 2000. Sugarcane is an advantage in the North Central. In 2000, sugarcane area was at 52.7 thousand hectares, with output was nearly 3 million of tons. However, the sugar industry in Vietnam has been in a severe downturn due to high production cost and lacking of buyers. In the near future, when Vietnam official joins in AFTA or WTO, the sugar industry will be under serious competition and will face many problems. Some perennial industrial crops as coffee and rubber has been promoted. However, the advantage of coffee and rubber in the North Central Coast was not high. Thus, planting these crops has not brought good results yet. Livestock has developed considerably, particularly poultry production, with average growth at 5.3% per year in 1900 – 2001. Nowadays, cow production is strongly expanded in some provinces as Quang Tri because it is considered to be a potential industry.The South Central Coast is a region with strong-point of aquaculture. This is an industry which brings great economic results in the past years and it has quite big potential. Apart from rice, sugarcane, cotton and peanut are important industrial crops. In 2000, the sugarcane area in the region was at 64.6 thousand hectares, with an output of 3 million of tons. Cotton trees are mostly planted in Ninh Thuan and Binh Thuan province. Cotton area in the whole region in 2000 was at 3.3 thousand hectares and output was at 3.5 thousand of tons. Pepper has also developed rapidly, with pepper area was at 1077 hectares in 2000 and output was at 2053 tons. Beside cultivation and aquaculture, livestock has been widely expanded. This region has advantage in big cattle breeding, especially cows and sheeps and goats for several years. These are high value products and will develop strongly in the future.

4. Some issue in agricultural diversification in the past years In general, agricultural diversification was still slow, mostly unprompted and has not followed closely the market demand. All above analyses shows that cultivation now made of big share in total agricultural production value, in which food crops value accounted for over 60%.With the economic development, agriculture will gradually move from mainly food production to a larger mix of farming activities, share of livestock, aquaculture, fruit tree and industrial crops will increase. Finally, the share of non-agricultural activities will also increase dominating in the rural economy. The virtual development in Vietnam in the past years shows that agricultural diversification in the rural area has changed slowly. During twenty years, Vietnam had intended to change the livestock sector into one of the key industries, the livestock share, however, was still not exceed 20% of total agricultural production value. In the recent years, the share of agro-forestry-fishery in total GDP has obviously dropped, but in the view of household total income, the contribution of these sub-sectors made of a big share and it rose from 40.7% in 1996 to 41.6% in 1999. In the rural areas, this rate rose from 57.3% to 58.5% in the same period and income from industry and service has fallen to

15.9% from 17.9%. It shows that agro-forestry-fishery were always important income sources of people.At present, rice is still holding a key position both in terms of planting area (over 60%), energy supply (75%) and contribution to export (from 14 to 15%). Moreover, paddy production has increased with the rate which is higher than that of the agriculture in general.Although agricultural exports rose strongly in 1990s, commodities components has not made big changes. Rice and aquacultural products accounted for 55 – 59% of total agricultural export and have not changed much in the past decade. Coffee and rubber exports increased, while rubber, fruit and vegetable exports fell sharply. Even while rice is still dominant, the agricultural production and agricultural exports in Vietnam have diversified to larger extent as compared to other developing countries. The two most important commodities (except for aquacultural products) are rice and coffee, making of 37% of agricultural export and 17% of total country export value.

Table 14. Structure of agricultural export  1990 1995 1996 1997 1998 1999 2000 2001 2002Agricultural export value (US$ mil) 1149 2521 3068 3239 3324 3774 4308 4428 4630Export share (%)Rice 32.6 21.0 27.9 26.9 30.8 27.2 15.6 14.1 15.7Coffee 6.4 23.7 11.0 15.2 17.9 15.5 11.0 8.8 6.8Rubber 4.6 7.5 5.3 5.9 3.8 3.9 3.9 3.7 5.7Tea 1.7 1.0 0.9 1.5 1.5 1.2 1.3 1.6 1.8Cashew 1.9 3.5 2.5 4.1 3.5 2.5 3.0 3.4 4.6Pepper 0.8 1.5 1.5 1.9 1.9 3.6 3.3 2.1 2.3Vegetable & fruit 5.0 2.2 2.9 2.0 1.6 2.8 4.9 7.8 4.3Ground nut 3.7 2.8 2.3 1.4 1.3 0.9 1.0 0.9 1.1Fishery 20.8 24.6 22.7 24.1 25.8 25.8 34.3 41.0 43.7Other 22.7 12.1 23.0 17.0 11.9 16.6 21.6 16.6 13.9Total 100 100 100 100 100 100 100 100 100

Source: Ministry of Agriculture & Rural Development

Furthermore, agricultural diversification sometimes was far from primary production and processing, leading to a somewhat contradiction between processing and raw-input producing zones. Another important problem related to this is the case of sugar industry and fruit & vegetable industry. Some sugar mills with hundred billion of VND investment have to operate at very low capacity of only 20 – 30% due to raw material deficiency. Some rather isolated mills can use only 10% of their capacity. As a result processing cost was very high and some factories went bankrupt forcing the State to compensate for the losses. Thus, sugar mills now became big burdens for the State.

REVIEW OF FACTORS INFLUENCING AGRICULTURAL DIVERSIFICATION

1. Policy environment

Since 80s the Government of Viet Nam has been managing the transition from a relatively closed, centrally planned economy towards one which is market-oriented with reasonable state interventions. The country is open to the world economy and market forces are gradually taking an essential role in directing resource flows within the economy.Agricultural reform is a starting point of this renovation process. It is also important to note that the structural adjustment and diversification in agriculture under the reform framework are seen as ones of the most important measures for increasing income and living standard of rural inhabitants. A series of policy-induced successes allow the agricultural sector to strengthen its position in the overall economy, both in terms of foreign exchange earning and GDP contribution. Recognizing the important role of agriculture, the Vietnamese Government affirmed that rural development should follow the direction of "promoting a rural diversified market-based economy making full use of relative advantages of each region within the country and being in line with steps of the country's industrialization and modernization". The economic transition in Vietnam following by various policy changes can be divided into some major period of its evolution.The Pre-Reform Period of 1976-1980In 1976, with a great feeling of triumph over the prolonged war the leadership of Vietnam hurriedly embarked upon the course of building Vietnam within a short period of time into a powerful and prosperous nation. A number of ambitious development targets, thus, were set in the Second Five-Year Plan. The pro-industrial policy bias supporting the large-scale investment in heavy industry tended to induce an import-dependent industrial sector with low capacity utilization. Agriculture, which accounted for about 40% of total output and employed more than 70% of the workforce, was heavily taxed, underinvested and stagnated.Furthermore, the undisciplined monetary and the subsidy system created huge budget deficits. The primary goal of Vietnam’s banking system of that time was to allow state-own enterprises to fulfill their physical targets rather than to facilitate the efficiency of resource allocation. Table 15: Growth Rate during the Second Plan of 1976-80, in per cent

Target ActualGDP 13-14 0.4Agriculture 8-10 0.8Industry 18 0.4

Source: Economy and Finance of Vietnam, 1986-90

By the end of 1979 it was almost obviously understood that the centrally planned economy was hardly able to reach the targeted economic growth. During the 1976-80 while the population grew at 2.3% a year, annual average of GDP growth rate was only 0.4% (Table 1). The stagnation of agriculture brought about serious food shortage. The

industry, considered to be the key sector of the planned economy, grew at just 0.4% a year, mainly due to output of the small-scale non-state handicraft sector. In 1979, 40% of industrial output was produced outside the plan. This overall economic performance created the pressure for the first steps of reform. The First Reform Movement of 1981-1988The overwhelming concern of the policy-induced economic downturn in 1979 already began to call for changes in economic regime. However, first steps of the reform were not implemented until January 1981.Instruction No. 100 promulgated by the Central Committee of VCP in 1981 formed a contract system giving more control to farmers in productive activities. According to the “product contract” system, the role of an agricultural co-operative is limited to providing services such as preparing land, providing water, seeds, fertilizers and pesticides. The farmer contracted to deliver a given quota of rice to the co-operative, and could keep the surplus above the quota and sell it at free market. As an attempt, the contract was set to be valid for 5 years. Under the Instruction No.100, however, farmer still could not make production decisions. He was still a worker “hired” by the co-operative. During the Third Plan (1981-1985) the gross agricultural product had increased at a rate of 5.6% per year. However, the growth of agricultural production was largely based on bringing the unused/underused productive resources back to their full capacity. Toward the end of the plan period, there were signs that the growth momentum was exhausted. Farmers were loosing incentives as the mandatory delivery of grain increased permanently. Overall, inflation rose to 95% in 1982, compared to an average of 22% during 1976-1980. Farmer and worker incomes lagged further behind the pace of inflation. A currency redenomination failed, exacerbating inflation, and widening the gap between the official and parallel (market) exchange rate of 18 VND per USD and 115 VND per USD respectively. At this time, the state sector employed about 8% of the total labor force, and provided 24% of the GDP. Under centrally planned economy Vietnam’s state sector was much smaller and weaker than that of most of the European socialist countries (GDR: 97%, Hungary: 65%), or even China (57% of GNP). This fact would play a major role in the transition to a market-based economy in the late 1980s. In 1986 with a hyperinflation rate of 487% agriculture and the whole economy was fully stagnated due to shortages of inputs and poor management. In December 1996, the Sixth Congress of VCP officially called for "Đổi Mới". Despite its name “renovation”, Đổi Mới turned out to be a radical change rather than the continuity of past policy. Đổi Mới expressed a greater willingness to gradually replace the old system with a new, more market-oriented economic model. During the next year, several important changes had been introduced. Removal of internal trade barriers led to a flourishing informal sector in 1987. The official exchange rate was depreciated in 1987 and again in 1988. The state monopoly in trade was ended, laws on foreign investment were liberalized in January 1988. The banking system was reformed with the establishment of 4 state-owned commercial banks in July 1988, the State Bank of Vietnam taking a supervisory role.It is notably to note that the most crucial step of the early reform stage was the introduction of Resolution No. 10 by the Central Committee of VCP in April 1988. This regulation defined the farming households as autonomous economic units in rural areas, ending the monopoly position of the collectives.

Đổi Mới - The Second Reform Movement since 1989The reform process reaching its peak in 1989 along with a series of radical changes swept away most of the remains of the central planning system, creating an environment for a market-oriented economy. All the control such as urban rationing, administered prices, state procurement and public monopoly in the domestic market were abolished. As a result, the marketing and domestic trade of agricultural products is now mainly in the hand of the private sector, with an estimated share of approximately 60-80% of marketed products.Nevertheless the government has kept certain intervention in the agricultural market. In the domestic market, state companies are expected to stabilize prices. The main measure of the government in this regard is to instruct state corporations to purchase agro-products (mainly rice) from farmers and traders when the retail price fall below the “reference” bottom level determined by the government, by offering working capital with a subsidized interest rate. The subsidies are funded from the Price Stabilization Fund (PSF) established in April 1993. In the country, some “general” state commodity-specific corporations engaged in distribution and exports of major agro-products are entitled to distribute subsidized loans and export quotas to the provincial companies. The national food security priority is the main justification offered by policy makers in Vietnam for allowing only state companies to export rice. Since 1989, the policy of quotas and the restriction of exports to state companies by licensing have remained broadly unaltered. During this period, however, there have been changes in the specific contents of the policy.The exchange rate was substantially devalued. By the middle of 1990 the official rate and the market rate essentially came into line. The growth of money supply was sharply cut, the interest rates offered by banks on deposits were raised above the inflation rate, and rules for foreign exchange were relaxed. The initial results were impressive. Agriculture output grew at 7.5% in 1989; Vietnam became the world's third largest rice exporter with 1.4 million tones of rice exported. Inflation dropped from 308% in 1988 to 35% in 1989. Dong deposits in banks grew from 0.8% of GDP in 1988 to 3.8% of GDP by the end of 1989 as the confidence of the population in the domestic currency rose. The service sector grew quickly. Overall GDP rose by 8.0%, the best rate after the war.Although the pace of economic reform somewhat slowed down after 1989, some important decisions were made in the following years. In June 1991 foreign banks and joint-venture banks, as well as limited liability companies were permitted to operate. The state budget deficits were moderate in 1990 and 1991, which was fully financed by issuing bonds, rather than printing money. A modern tax system began to take shape. The public sector was restructured. Efforts were made to fight corruption. A new constitution came into effect in April 1992.On the other side, economic growth was depressed by two serious shocks in 1990 and 1991. By March 1990 the collapse of most credit cooperatives showed fundamental weaknesses of this system. Credit cooperatives were the main finance source for the private sector, with estimated 2000 small enterprises relying on them for capital. The second shock was the ending of Soviet aid and the collapse of the Eastern European

market in 1991. Export went down from 2.5 billion in 1990 to only 70 million rubbles in 1992. Soviet aid at its peak was about 5% of Vietnam's GDP (for comparison, the per capita aid from the USSR for Cuba and Mongolia was 14 time larger)1992 can be considered as the first post-reform year after most major changes had been introduced and serious shocks absorbed. Compared to 1987, the year before the decisive period 1988-89, some interesting conclusions could be drawn (Table 2). At a first look, the structure of Vietnam’s economy has changed little over this period. While the labor force has grown in line with the population, which rose from 61 million to nearly 70 million, about the same employment structure is found in agriculture (72%), industry (11%) and service (17%).During 1987-92, despite of the great constraint in terms of cultivable land per capita (just 0.1 ha), agricultural production has increased by almost one third. Rice yields amounted to about 3.1 tons per ha and could reach 4-5 tons per ha, the level of some countries in Asian such as Indonesia, China, etc. Cash crops like coffee, rubber, or peanut have been substantially expanded. Agriculture export has contributed the main part of non-oil export, which raised from 330 million USD in 1987 to 1,800 million USD in 1992.Overall, the impacts of reforms had been mostly positive. Between 1987 and 1992 the economy grew at annual 7.1%%. With a population growth of 2.1%, that meant that the average per capita income grew at 4.5% a year. Remarkable were the increases in investment and savings. Recorded investment has risen from 9% of GDP in 1987 to 12% in 1992; national savings rose from 0% to 8% of GDP in the same period, which is believed to be still underestimated. Clearly, this trend is of fundamental importance if further economic growth is to be sustained.Resolution No. 5 approved at the Seventh Party Congress in 1993 moved further in the direction of rural development and recognized the long-term land use rights for farming households including the right to exchange, transfer, lease, inherit, and mortgage. These rights promoted farmers’ efforts to invest in land reclamation, land improvement in order to multiply seasonal crops.

Agriculture-related Policies: Land policy:In Vietnam land has been defined as a national property and should be under the Government regulation. However, over the last 2 decades land policy in Viet Nam has shown a steady shift toward the granting to households more and more flexibility in the use and exchange of land. The evolution of land policy has responded to experienced gained from previous steps. Before 1988, almost agricultural land was allocated to co-operatives and state farms. Resolution 10 of the Central Party Committee (promulgated in 1988) established the basic conditions under which farm households were allowed to have long-term land-use rights to agricultural land with the period of tenure varying according to the type of crop. It gave farmers the right to receive land-use rights on a long-term basis, but did not recognize the right to transfer, mortgage, or inherit these rights. The Land Law of 1993 went further to recognize the “five rights” in land use: exchange, transfer, leasing, inheritance, and mortgage. It also recognized the concept of land value, to be used as a basis for land taxation and compensation when land is taken by the state for public use. Land use certificates would be 20 years for annual crops and 50 years for

perennial crops. The Land Law of 1993 also specified that a ceiling of 2 hectares for annual crop land in the north plain and 3 hectares in the south plain areas. With respect to perennial crops land limit is 10 ha in plain areas and 30 ha in upland areas. Numerous circulars, decrees, and regulations were issued to clarify various aspects of the implementation of the land law, although some confusion remains. Since the approval of new land law in 1993, majority of land under food crops were registered with land user certificates. In upland areas, however, forestry SOEs still retain legal control over large areas of degraded land, which is used for crop production by many poor families. The 1998 Amendment to the Land Law introduced flexibility in the implementation of the land ceilings, depending on local conditions. In addition, farmers are allowed to rent land in excess of local limits, and individuals and organizations are allowed to rent land for non-agricultural investment purposes. Recently, Resolution 3 issued in 2 February 2000 recognized the concept of large-scale commercial farms "trang trai" and announced the government’s intention to promote and support these farms. The Resolution, however, does not provide a definition of commercial farms, nor does it detail the types of support that the government will provide. In general, the renovation in land ownership has created a strong momentum for the development of agriculture. Marketing and Pricing policies:Vietnam’s commodity marketing structure is characterized by a segmentation of enterprises in the market between the State and private entrepreneurs. The national, provincial or district enterprises are heavily involved in marketing, processing and international trade and private entrepreneurs have only been able to make significant inroads in processing and trading of non-traditional exports like cashew, coffee and some kinds of fruits and vegetables. Domestic agricultural markets have been progressively liberalized since 1988. With the market deregulation farmers have been permitted to trade with intermediaries of their choice. Prices for the major agricultural products in the domestic market are determined by the market forces. Nevertheless, the Government has kept certain intervention in the agricultural market. In the domestic market, State enterprises are expected to stabilize price. The main measure of the Government in this regard is to instruct state corporations to purchase agro-products (mainly rice) from farmers and traders when the retail price fall below the “minimum price” determined by the government, by offering working capital with subsidized interest rate. The subsidies are funded from the Price Stabilization Fund (PSF) established in April 1993. Another measure of the Government in rice marketing was expanding the range and number of buyers consigned to purchase for export. Despite expanding the number of entities with formal rights to purchase for export, but most of them are still State-Owned Enterprises (SOE).

Agricultural tax and subsidiesFarmers have to pay some agricultural tax for the land allocated. The State has promulgated the Law on agricultural tax with collection level applied by 7% of output as lower than before (10%). Such tax encourages the efficient use of agricultural land and ensures the equity between the land users. Due to the loss of agricultural outputs caused

by natural calamity, the agricultural tax could be reduced or exempted. In general, farmers may have some subsidies for seeds and other inputs (fertilizers, pesticides, etc.) when they use new varieties and apply new production technology.

Import and export tax: Generally speaking, tariffs are low on exportable agricultural commodities and rather high for most agricultural processed products. For instances exports of commodities like rice, coffee, natural rubber, tea, pepper have no export taxes. High tariffs are imposed on processed products to protect the domestic food processing industries. Since the time scheduled for tariff reduction under CEPT list is coming closer, the domestic agro-processing industry will face great challenge from competition of ASIAN countries. Under the CEPT list, import tax of most of the agricultural commodities will be reduced to 5 percent by the year 2006. Regarding agricultural imports, only refinery oil, raw and refinery sugar were included in the list of Import Goods under the licensing procedure of Ministry of Trade. Exports of woods from natural forests are prohibited for the purpose of forest protection. With the exception of agricultural machinery, the tariff rate imposed on imports of agricultural inputs are set to 0%. This policy is designed to support farmers. Rice, one of the exported products was managed by quota to ensure food security. Recently, rice quotas were removed. In addition, most of other agricultural products and inputs are traded freely but still under control of tax and SPS. Rural credit and financial services: Currently, the major agents involved in the formal rural credit system are Vietnam Bank for Agriculture and Rural Development (VBARD), Bank for the Poor (VBP), and Peoples’ Credit Fund (PCF). However, in remote and mountainous areas farmers find it difficult to get access to the formal credit system. Moreover, it is argued that both of VBARD and PCF seem to be prone to the better-off farmer households. There seems to be no linkage between rural credit market and the government's monetary policy, and the informal market appeared to be more effervescent than the formal one.

Extension According to the Decree No13/CP (1993) of the Government, the agricultural extension system consists of two forms: public and voluntary agricultural extension. The public agricultural extension seems to be well organized from the central to local level. At national level, the Extension Department of the Ministry of Agriculture and Rural Development (MARD) is responsible for coordinating all the extension activities throughout the country. Each province has an Extension Centre that belongs to the Provincial Department of Agriculture and Rural Department. At districts level, there are Agricultural Extension Stations and local extension officers. Voluntary agricultural extension organizations could be research institutions, universities and other organizations or individuals that are voluntarily involved in the agricultural extension activities. Agricultural extension services were tied to a particular program usually associated with transfer of improved technologies to farmers. For the past 5 years, the Government allocated available fund for agricultural extension services and programs that were usually associated with a new variety package (e.g., for hybrids of rice, corn, cotton, sugarcane) or special production techniques (changing cropping pattern,

integrated pest and nutrient management). This fund was distributed to the different agricultural extension organizations to cover the salary of extension staff, administrative cost and some important national extension programs. These organizations selected pilot sites, organized training of selected farmers for introducing new variety package or new production techniques, supported them a part of new seed, fertilizers, pesticides, etc. and organized field visits. Normally, farmers have not to pay anything for the extension services. Many pilot production sites have had good effects. Despite having some major achievements, the agricultural extension systems still have some constraints such as budget deficits or management capacity, etc.

Investment policy: Currently, investment of the government is the most important source of the total investment channeled into the agricultural sector. However, the overall investment policy of the government tends to be biased in favor of the industrial sector with the neglect of the farm sector. Investment of the government in the agricultural sector seems to be ineffective since its focus mainly on SOEs because most of the SOEs tend to be capital intensive and they do not absorb much labor in the rural area. In addition, investment in the agricultural research system and extension services is also inadequate. Economy-wide policies: Generally, the investment policy biased toward urban areas and capital-intensive industries (mainly SOEs) caused harmful effects to the agricultural sector in several ways. This adverse tendency tends to be exaggerated by the pursuance of overvalued exchange rate policy. During the period from 1997 to 1999, the Vietnam's dong has depreciated but at a much lower rate as compared to that of other countries in the region, thus lowering the competitiveness of Vietnam's farm exports.Poverty reduction policy:Since 90% of the poor lives in rural areas, the current reforms in agriculture and rural areas have strong positive impact on the poverty reduction in Vietnam. The achievements in poverty reduction has been largely due to rapid growth and agricultural diversification. Job Creation Programs, Infrastructure Construction for 1000 Poor Communes, "Lighting-point" Program, activities of Bank for the Poor and overall impacts of reform process have helped reduce the rate of those people living under poverty line from 58% in 1993 to 29% in 2002.

2. Research and agricultural extension systems

2.1. Renovations in Research and Agricultural Extension Systems

2.1.1. The Government's Documents on Technology Transfer for Agriculture & Rural DevelopmentWith respect to the application of science and technologies for the agriculture and rural development, in the past fifteen years of renovation, the Government has promulgated many instructive documents supporting technology transfers for agriculture and rural development. The key documents related to the research and extension systems are: Resolution 15-NQ/TW, Resolution 10-NQ/TW, Resolution 05-NQ/HNTW, Resolution 06-NQ/TW and the 2001-2010 Strategy for Socio-Economic Development

In order to implement the above-mentioned Party Resolutions, a number of follow-up policies and activities were designed by the Government focusing on the dissemination and transfers of scientific knowledge to farmers. The expense source for these activities comes from the State budget for science. In general, the policies promulgated by Vietnam's Government in the past ten years have concentrated mainly on the following activities:(1) Establishing and maintaining the agricultural and forestry extension systems at different administrative levels from the central to the local ones. (Typical examples of this kind of legitimate documents are: Decree 13-CP issued by the Government in March, 1993 on promoting agricultural extension services; the Decision 164-TTg of the prime minister proclaimed in March, 1995 on encouraging forestry extension system) and various circulars guiding the implementation of these activities.(2) Ratifying Science & Technologies Programs, Projects and research assignments for the socio-economic development in rural and mountainous areas; in line with guidance and financial mechanism to carry out the programs. (Since 1990, there have been big programs such as Program KX-08 promoting science & technologies activities in mountainous areas and in areas of ethnic minority groups for the period of 1991-1995; Program for constructing application models of science & technologies for socio-economic development in rural and mountainous areas in 1998-2002).(3) Enforcing the implementation of infrastructure construction in rural and mountainous areas; structural adjudgement of rural economy; processing and preserving agricultural commodities; developing rural non-farm enterprises. (Typical documents in these fields are: Decision 135/2000/QĐ-TTg of the Prime Minister (29/11/2000) on the socio-economic development program in the poorest communes (Program 135); Decision 352/TTg (28/05/1996) on promoting agricultural and forestry product processing and rural non-farm enterprises; Decision 132/2000/QĐ-TTg (24/11/2000) on encouraging the expansion of rural non-farm enterprises; Decision 656-TTg (13/09/1996) on socio-economic development in the Central Highland in 1996-2000 and in 2010, etc.). (4) Documents stipulating land use, taxation, rural credits, agricultural co-operatives, agricultural enterprises, and the establishment of commune groups, etc. have some components related to encouraging and supporting activities such as dissemination of scientific knowledge, improving technologies or transferring technologies into agricultural production.

2.1.2. Remarks on the Technology Transfer Policies in Agriculture and Their ImpactsFirst, there is a big gap between the Party Resolution/Instruction Documents and the Government's implementation guidance documents. Generally speaking, all Party Documents on guidelines and policies for industrialization and modernization of agriculture and rural economy seem to be comprehensive but very clear in broad meaning. However, the Government's guidance documentations for promoting the application of science & technologies into agricultural production at different levels were often confusing and contradictory Typical example of impracticality reflected in some Government guidance could be found in the following documents:

+ Documents on mobilizing scientific staff to participate in technologies transferring activities in mountainous areas.+ Documents on financial management in technologies transferring activities in rural mountainous areas.These regulations are obsolete and cannot meet the renovation requirements set up by the Party's Resolutions.The main contradictions between the Party’s guidelines/policies and the Government administrative/legislative documents are as follows:First, the Party’s resolutions have always emphasized on the quickly dissemination and transfer of science and technology achievements into the agricultural production. In fact, during a long time up to the 90s, most of these activities were carried out in a top-down manner.Second: the financial regime and the supporting policies for these activities are inadequate and insufficient. At present, there are very little policies encouraging other non-state sectors to participate in the science & technology transfer activities.

2.1.3. Agricultural Extension Systems

(1) Establishing Agricultural Extension SystemsThe State Extension Systems was officially established according to the Decree 13-CP of the Government in 1993. The Government has organized a nation-wide extension system including agriculture, forestry and fishery, and encouraged the establishment of voluntary extension services by different domestic and foreign organizations at home and abroad which operate according to the Vietnamese laws in order to support agriculture and rural development.Main contents of agricultural extension activities are:1 – Popularizing advanced techniques in cultivating, breeding domestic animals, processing technologies, preserving farming products and good experience in production.2 – Improving and developing skills and understandings of economic management in farmers to enhance the effectiveness of production and trade.3 – Coordinating with responsible agencies to provide farmers with information about market and prices of agricultural produce for effective production and trade.

(2) Types of Agricultural Extension(a) State agricultural extension system:The State agricultural extension system is organized from the central to local levels with four levels as follows:Provincial level: In each province, there is one center for agricultural extension under direct control of the Department of Agriculture and Rural Development (DARD). The center has the following functions: Popularizing and transferring technological advances in agriculture, forestry and

fishery and good experiences in production to farmers. Improving knowledge of technology and economic management, training local cadres

in encouraging agricultural extension, and providing farmers with information about market and prices of farming products;

Establishing relationship with domestic and foreign organizations to attract capital or their direct participation in agricultural extension activities in the locality;

Taking part in constructing and popularizing technical processes of intensive farming to farmers;

Summarizing and evaluating the results of implementing of the programs and projects in the province.

At present, there are 61 agricultural extension centers in 61 provinces of the country with 2500 cadres, of which about 1657 cadres are regular members of personnel. On average, each center has a staff of 20 cadres (not including those who are working under labor contract and working in agriculture extension stations). In addition to the responsibility of carrying out contracts signed with the Department of Agriculture and Forestry Extension on constructing key models of encouraging agricultural extension, each center has to undertake carrying out agricultural extension models in the province.

District level: Organizing agricultural extension stations within one district, between districts, or in commune groups. Each station has the following functions:

Applying technological advances in the programs and projects of encouraging farming expansion to production on a large scale in the area;

Setting up displaying models; Giving instructions on techniques to farmers; Improving training professional skills, techniques and knowledge of economics,

marketing of the local cadres; Establishing clubs for successful farmers or groups of farmer households who share

the same interest. Up to 30/12/2002, fifty provinces and cities among 61 ones have district stations for

encouraging agricultural expansion, accounted for 82% of the districts with 522 stations and 1,404 cadres.

Local Level: (communes, co-operatives, production groups between villages or between communes)Local cadres: Local cadres work under long-term or short-term labor contracts.At present, 5,179 communes have local cadres in agricultural extension programs, accounted for 55% of the agricultural communes. Most of these cadres get allowances from the State budget. Besides, there are about 8,000 collaborators in these programs.

(b) Voluntary OrganizationsThere are some types of these organizations as followed:At institutes, education and training agencies: under different names, responsible for transferring some advanced technologies innovated by the organization itself or carrying out the technology transfer contracts signed with the State agencies. The expense is partly made by the organization and partly supported by the Government;At public associations : Farmer associations, gardener associations, veteran, women associations and the Communist Youth Union…taking part in transferring technological advances to farmers. The expense source depends mostly on all government levels;

At enterprises: Mostly departments of farming affairs carrying out technology transfer to the regions which supply material for the enterprise or taking part in activities relating to the enterprise’s benefit. Before 2000, the Government supported partly the expenses, but now most of the expenses are self-made;Individuals or groups of individuals: Participating in transferring technological advances, most of the expenses are supported by the Government;Foreign organizations or individuals: Giving support in capital and in carrying out transferring advanced technologies in the programs and projects of encouraging agricultural expansion;Agricultural extension clubs: These clubs are established by farmers and are an important force to perform and transfer technological advances in the rural areas. At present, there are 4 types of these clubs with the figures as followed:

Types Northern Region

Central Region

Southern Region

Total

Kind of clubs Extension branches Co-operation groups Hobby groups

710104006.215

38100115

98036.90054516

2.07136.9109456.346

Total 7.335 496 38.441 46.272

Summarize:

State extension is a 4-levels extension system from central to provinces, districts and local base. Expenses for this system is paid by State budget and they took the task of exchanging science, technology and other relative extension activities to farmers. State extension exchange science and technology to farmers through many canals which include system of multi-level State extension, and it cement with spontaneous extension organizations from institutes, universities, schools, clubs, associations, mass organizations, enterprises and international organizations.Expenses of the State provided for extension has been increased continuously, from more than 10 billion VND/year (years after the extension system was established) to nearly 70 billion VND/year now. However, according to us, these amount is still small because each province, on average, only received about 1 billion VND/year for extension. Extension method of the official extension system are now mainly concentrated on establishing models and training producers (it make up more than 70% receivable budget). Meanwhile, expenses for other activities such as social - economic extension (advising and training farmer about their work, helping on marketing…) are so little.

2.1.4. Agricultural research system

(1) Research System and research staff.Up to 2000, there have been built 25 research institutes, 5 universities and 120 centres, sub-institutes researching on agriculture on the whole country (table). Besides, we also

have many research units working in biological block, they also contribute a lot to the development of the country's agriculture.

Table 16: Research Institutes and research centres in the countryregions Research

institutesResearch Centres and sub-institutes

Total

Red River delta 17 62 79North East 1 7 8North West 1 1North Central Coast 4 4South Central Coast 3 3Central Highland 1 12 13North East South 4 28 32Mekong River Delta 2 3 5Total 25 120 145

Source: Personnel organizing Department, Ministry of Agriculture and rural development, 2001

For the personnel to work in research field, in 2000, we had had 7.608 agricultural researchers, in which 5.763 researchers were put on regular staff and more than 1.845 contracted persons. In the table below we had the degree statistics of researchers working agriculture industry:

Table 17. Quality of researchers in agricultural researchDiploma 1999 2000Doctor 10,4 11,4Master 12,1 12,7Bachelor/Engineer 77,5 75,9Total 100,0 100,0

Source: Personnel organizing Department, Ministry of Agriculture and rural development

Thus, at the fist step, we have had a firm foundation for the agricultural research system with the contribution of so many researchers who have basic standard in training. However, it is not a large number of agricultural researchers in comparison with the total population of Vietnam which is more than 80 million, and the majority of population (70%) lives in rural areas and does agricultural works.

(2) Budget for researchTotal expenses of budget:To our general observation, in some recent years, the State budget spent for research has been increasing rapidly, it increased two times after 5 years from 1996 to 2000.

Table 18: State budget for researchArticles 1996 1997 1998 1999 2000National program – Ministry of Science, Technology and

5 030 12 319 14 537 15 400 24 600

EnvironmentPrograms of Ministry of Agriculture and Rural Development 14 723 14 670 14 363 12 030 51 544Gene fund 1 390 1 490 1 600 1 980 3 100Upgrade, enhancement, repair 2 600 2 600 2 500 2 400 6 900Equipment 3 800 4 900 5 600 5 000 17 000Salary and apparatus 47 370 47 370 47 960 43 240 47 461Total 74 913 83 349 86 560 80 050 150 605

However, budget for renovating equipment is still small, in 2000, we only had 17 billion VND invested in renovating equipment, equal to 30% expenses for basic salary. Budget allocation:A considerable trend is the increase of State budget in percentage, it increase much more than other source of budget from the contribution of foreign co-operations, individuals, enterprises, etc. We need encourage the local to invest in research, however, it is necessary to arrange the subjects or research limit between each level to get effective.

Summarize:

Vietnam's system of agricultural research has been established for a rather long time, it gathered large number of scientists and researchers working in agricultural field. The quality of this team has been improved more and more. However, the institutions for research are often accustomed to the initial research approach, lacking of development research method, low ability in exchanging technology and extension. Although the investment of the State in research has been increased nearly two-times during the past 5 years from 1997 to 2002, this expenses is still too small in comparison with the demand. Now the State's expenses for research only make up 0,15% GDP of agriculture and 0,19% (GSO of Vietnam 2002) of the total State's expenses, while some other countries in the region such as Thailand, Malaysia, Chine all have higher percentage of research expenses than our country, (from 4 to 10 times). Due to small expenses, many units must spend much more time for activities that could bring back money. One of the disadvantages that can be recognizing easily of the Vietnam's research system is the overlap on function and dispersion of ability. The research system has not been planned systematically, its activities is confused so that it cannot bring together to become a common strength. The overlap is not only performed in the concurrent function of many units but also happened in each unit, they often confuse basic research with development research or technology exchange, etc. The concentration of units participated in the same development program that presided by the State had its purpose: to combine the strength of each unit, institute, branch in order to exchange progressive technique into production, increase the effectiveness and connect closely between research and exchanging activities. However, there become new difficulties in the problem of coordinating these activities.

2.2. Cooperation between private sector and public sector in research and extension

2.2.1. Management of professional skill at each level Thus, activities in extension have been undertaken by a large number of different actors. However, there is only the State extension that really specializes in all extension activities, while for the other actors, extension is only one of their many task. And, at province and district level, the actors are invested better in personnel and tools than commune level. Management of administration and professional skill is different among each actor. For example, only Veterinary Department and Plant Conservation Department that have the right to manage all side of both administration and professional skill of organization vertical of district depends provincial level. Other actors only conducted their subordinate offices in professional skill; management of administration is the task of the People Committee.

2.2.2. Co-operation between actors in technology transferRed River Delta is the high development region in agriculture field; its agriculture is high intensive. However, researches implemented at 2 districts in the centre of this region showed that: Actors from district level to inferior level often passively took part in exchanging

technology to rural area. They mainly carried out the role of the subordinate in implementing projects or establishing model following the requirement of actors at province level or central level. Actors at province level played an important part in making decision in expanding models of technology exchange into production.

At the commune or village level, there were rarely had models that exchanged directly to farmers. Most of agricultural service co-operatives, mass associations (women, farmers) and even the commune People committee are the actors that participating in exchanging technology at the local.

In the total of 45 technology transfer models for farmers that is implementing, there are 15 models, make up 33%, that applied the research results to exchange to production by the research institutes and research centres, 3 models of companies, enterprises to introduce their products (Van Dien phosphat fertilizer company, Nong Huu fertilizer company, etc) and 27 models practiced by local actors.

Table 19. Actors participating in technology transfer at each level Participations Number of model Percentage in the total

of Tech. Transfer modelResearch Institute, research centre 15 33Factory, enterprise 3 7Province's extension centre 15 33Other staff in Agriculture Department 9 20Farmer Association 2 4Women Association 1 2Garden Association 1 2Province's plant race company 7 16

Department of Science, Technology 10 22Total 45 100

Table 20. Actors participating in exchanging technology at local levelParticipation Number of

modelPercentage in the total of exchanged model

Agricultural Co-operative 13 29Authorities, People Committee 12 27Public associations 4 1Direct farmers 16 35Total 45 100

Province actors participated in almost all the technology exchange models for rural area, in which 4 units are the province extension centre, the other offices in agricultural department, the department of science and technology, and the crop plant race companies that are the main force units in exchanging process. At the same time, at the local, the agricultural co-operative and the People Committee are the two main actors participating in exchanging technology, the remainders occupied 35% of the total number of models are directly exchanged to farming households. Meanwhile, the local associations took part a little in this exchange activity. The world experience in extension shows that: to make the state extension system acting effectively, it is necessary for the local associations to put stronger pressure to extension associations.

2.3. Demand of applying progressive technique and attitude of farming households

2.3.1. Demand of agricultural services of farming households The general characteristic of farming households in Vietnam is small production, handicraft and diversified combination of many production types in the same household (animal husbandry, cultivation, non-agriculture). However, the Area of land and the main method of production in households are different across different region. For instance, the land Area of a household in Mekong River Delta is 3 to 5 times larger than that one in Red River Delta. And while households in Mekong River Delta focus on cultivating rice for goods, households in Red River Delta have trend of diversification in economic activities, they develop animal husbandry, cultivation and especially non-agricultural activities. Maybe it is the reason why the demand of development support of households is rather diversified across regions.

Households' demand is rather diversified; include demand of land, credit, technology and other agricultural services such as electric service, supplying materials or training, etc. Now there has not had general research that evaluating different demands of farming households on the whole country. However, the statistic of service activities in co-operatives could partly show the difference of demand of agricultural services among regions. On the whole country, such services like plant conservation, technique training, need breed of plant or animal, veterinary, material supply and especially irrigation are the services that the majority of farming households have demand. So that there are 94% of all co-operatives are now acting on water services, 61% on plant conservation and 47%

on training, extension, etc. To compare each region, farming households in the Northern region have higher demand of water and plant conservation while Central and Southern region have demand of training, information, material supply, plant race, land exploitation,…According to us, the different demand of being supported through extension services in each region is originated from the main reason: it is the difference of production characteristic and production scale of farming households in each regions. In such area like Mekong River Delta, where agricultural commodity is highly developed, the demand of market information, price, new techniques, training, materials, tools, consumption, etc is very high. While in the North, farming households often used the way of self-supported production, so their demand are services that can preserve crops, restrain risk from storm or flood (irrigative service and plant conservation service). Besides, the factors of people's knowledge and historic characteristic in each regions also affected a little to households' demand.

Table 21. Activitie of Agricultural Co-operatives in 2000Unit: % of number of co-operative

Region Whole country

The North The Central

The South

Number of co-operatives in survey 1686 1359 279 3271. Irrigation 94,9 95,7 97,4 91,42. Plant conservation 61,9 73,9 11,1 11,93. Veterinary 37,7 16,7 51,9 44,34. Race 41,3 36,2 73,1 62,25. Extension 47,5 41,8 82,5 71,26. Material supply 36 32,2 55,2 51,97. Land working 14,8 9,8 40,5 35,78. Consuming products 10,3 8,7 17,9 16,89. Produce/Process 0,4 0,5 N/A N/A10. Electric 52,2 52,7 57,7 50,111 Other services - 3,9 N/A 4,9

Source: Co-operatives Unions

2.3.2. Farmer households' appreciation of exchanging results. In 2002 an investigation implemented at Phuc Tho district, Ha Tay province by experts from Institute of technology policy strategy showed that: although associations of research and training are the places where created progress in technology, but they did not often get in touch with farmers so that there were only 15% of them are high appreciated, the remainder are almost at the normal level. For the acting of free market, there are many problem needed to be observed from two sides: the sellers and the consumers, 90% of surveyed households said that the influence of market is normal or difficult to assume

2.4. Centralizing and Decentralizing Technology Transfer into Production

2.4.1. Government Key Extension ProgramsIn the past ten years, the Government has approved 19 agricultural extension programs, 8 forestry extension programs and 5 fishery extension programs; these are key programs and have been invested VND340 billion by the State budget. In localities, the people’s committees of provinces have ratified hundreds of programs invested about VND 70 billions. Thus, the Government and all the localities have invested about VND1,000 billion for extension activity, in average 100 billions VND per year. Total, there are 8500 extension models from national program and 15000 extensions models of local extension program. Sure alls extensions program have also negatives points buts theirs influences are importance for agriculture development in ten years.

2.4.2. Performance of voluntary extension organizations.

a) Agricultural Research institutes/Centers and Universities: In recent years, at institutes, research centers and universities of agriculture, silviculture and aquaculture, there have been activities in transferring advanced technologies to farmers. In the meantime, these organizations have also carried out investigation, experiments, and multiplication of new breeds, and, together with the system of all levels of agriculture, silviculture and aquaculture encouraging, transferred the results to farmers when these results are obtained. The total expenditure of agriculture encouragement program in 2003 provided by the Ministry of Finance was encouraging agricultural extension encouraging agricultural extension VND68 billion, the Bureau of Agriculture and Forestry Encouragement distributed to institutes and education and training agencies VND 9 billion and 150 million, equal to 13% of the total expenditure of encouraging agricultural extension activities, in order to help institutes and education and training agencies with technology transfer.

b) Mass organizations, socio-political organizations and farmers’ voluntary organizations of agricultural extension:

The Ministry of Agriculture and Rural Development have signed five joint resolutions in combining agricultural extension activities with organizations: The Association of Veterans, The Association of Farmers, The Association of Women, The Association of Gardeners, and The Ho Chi Minh Communist Youth Union.The Association of Farmers has established a centre of voluntary encouraging agricultural extension subordinating to the Association in order to help branches of farmers in the provinces perform encouraging agricultural extension activities in their systems of organization. The Association promoted the movement “Poverty Alleviation” in the provinces. The Association of Women had the movement “Women help each other do home economy”. The Association of with more than 4 million members in rural regions, among those, 29% have been communists, 32% have been middle and high ranking officers, 67% have been the key workers in the production movement, has become an important force in technology transfer in rural area. Many models of gardens and farms have brought the income of hundreds of million dong a year, becoming good examples for other farmers to follow.The Youth Union which had the movement “The Youth establish their businesses” have built thousands of young clubs of encouraging agricultural extension, attracting millions of rural youths to applying technologies in production and business, making many of them young farm owners. Every year, invested 1-1.2 billion dong in the Association of Gardeners in encouraging members, built nearly 2,000 performance points in 32 cities and provinces, trained 15,000 members, published 20 book titles, combined with public mass media in introducing efficient VAC models.c) Enterprises:Since the moving to the market economy, the Law on Business coming into force, especially after the Decision 80-CP of the Government on consuming agricultural products through contracts between enterprises and farmers, enterprises have actively

participated in transferring technological advances to farmers in order to build regions of materials, improve the productivity and quality of agricultural products, serving the needs of enterprises.The system of encouraging agricultural extension at all levels have combined closely with 19 enterprises, helped them develop varieties of goods, as well as do input or output services for programs of encouraging agricultural extension. For example, the central level, the Bureau of Agriculture and Forestry Expansion Encouraging have:- Combined with the Central Company No1 of Tree and Plant Breeds, the Southern

Company of Tree and Plant Breeds and some other companies of tree and plant breeds in some provinces to transfer the technology of producing cross-bred rice seeds to cooperative farms and groups of farmer households. It is the company that consumes the produced breeds for those farms and groups.

- Combined with the Tea Corporation to hold the planting of new high quality and productive tea breeds, serving the need of proceeding tea for export such as the tea breeds: TRI777, LDP1, and LDP2…

- Combined with Sa Pa Company of Vegetables and Fruits to experiment the model of encouraging agricultural extension for temperate fruit trees.

- Combined with Luong My Factory of Chicken Breeds to hold services in chicken breeds in models of encouraging agricultural extension.

- Combined with the Corporation of Rations to expand growing rice seeds of high quality for export such as IR64, VND95-20, and VD20…

- At local areas, businesses have also combined closely with programs of encouraging agricultural extension at different levels to proceed the displays and transfer of new products to farmers, some of which are An Giang Company of Vegetarian Protection, Binh Dien Fertilizer Factory, Lam Thao Super Phosphate Company, Song Gianh, Komic, Lam Son Suger Company… Some foreign enterprises that have performed good activities in encouraging agricultural extension such as Bioseed, CP Group, PIC, Pioner, Novatis, Chiasin, Proconco, France Hybrid, Cargill, and Biomin… have transferred many productive breeds of high quality into production. It should be admitted that recently, enterprises have been very effective channels of transferring technological advances as they go with the output of farmers’ production.

d) International organizations:Some non-governmental organizations have helped local areas build models of encouraging agricultural extension and do voluntary agricultural extension encouraging activities. Among those was the Vietnamese- Swedish Program of Developing Mountainous Rural Areas (MRDP) which has been carried out in an area of 278 hamlets of 26 villages of 17 districts of 5 provinces of Lao Cai, Yen Bai, Ha Giang, Tuyen Quang, Phu Tho, and, Helping Programs of Oxfam GB, Helvetas, ADDAIPM, CIDSE, SNV, FADO/FOS… These organizations have mainly help poor farmers and farmers in remote areas know how to do business, eliminate poverty, and develop the economy and society.

2.5. Extension Products and Extension cost

2.5.1. Advanced Technologies and Transferring Technologies

Products of technology transferred to production of units encouraging agricultural extension are mainly concerned about new breeds of plants and domestic animals and technological procedures for improving the products’ quality and productivity. Meanwhile, high technological products are not various; especially, there is nearly not any transferring models of general social economic production organizing…. In addition, if transfer models have not been brought widely to production because the need and ability of production in reality are not strong enough, models of organizing production, circulation, distribution or quality control of agricultural products are resulted from the neglecting of the organizations studying encouraging agricultural extension or their incapability of carrying out these models. The reality of production today requires models of production co-operatives and organizations, because our agriculture, except in some mountainous areas are still in the situation of self-sufficient modes, in the rest areas, is basically moving to the market agriculture. Helping farmers to improve production, find markets and participate effectively in the market is an urgent requirement nowadays.

2.5.2. Cost of Technology Transfer in AgricultureIt is estimated that Vietnam today has not created a technology market in the rural area. Therefore, technologies of research units are considered public property and the transfer of these technologies to local areas is the State’s service, which is brought to farmers by units researching encouraging agricultural extension, agents and local governments. It is a form of subsidization in which units realizing the transfer find it difficult to keep business accounts on the cost or the price of technological advances.As the expenditure provided is limited, some of the encouraging agricultural extension activities are done following the model of combining the State and the people. Contributions of all agents participating in the activities are appealed according to the ability of each. For example, units researching and owning technologies contribute breeds of domestic plants and animals, the state body of encouraging agricultural extension is responsible for expenditures in training and farmers pay for fertilizer and effectuation… However, in general, there are not any specific rules or specific ratios of contribution.

2.6. Training and the Staff of Trainers in Agricultural extension

There are two types of training: professional and technical training.Technical training includes the following forms:

Training According to Farmers’ RequirementsThis is a very popular activity, which attracts the participation of agents in encouraging agricultural extension such as: centre, stations of encouraging agricultural extension, stations of veterinary, stations of botanical protection, bureaus of agriculture and rural development, companies of insecticides, companies of foodstuffs for domestic animals….The commune people’s committees, the co-operatives or associations or organizations have requirements for training. However, requirements are not always accepted because of the shortage of human recourses and/or materials.

Training and Combining with Model BuildingThis is the training form in the applied research subjects, the programs of a province, displaying models and models of producing breeds. The farm households that participate

in the models are compelled to participate in the training; however, if there are any vacancies, some other farmers who have the need could participate.Training according to requirements of CompaniesThis form of coaching is held in order to popularize and sell the companies’ products. Companies of foodstuffs for domestic animals, companies for insecticides… contact co-operatives to carry out training courses. Farmers participating in the coaching are paid with a small sum of money and are provided with materials. Centers of domestic animal breeding also have this form of training to help farmers understand the advantages of artificial insemination in order to promote the activity of providing products of the centers.Other forms of Technical TrainingThere might be other forms of technical training including IPM training or the form of advisory for a small number of cadres. The purpose of this training is to teach farmers the way to control the general epidemic by maintaining the balance between pests and insect eaters in the nature and using insecticides only when the situation of pests is seen to be uncontrollable.Training, advising in the models of organizing farmers is the coaching form of cadres that is carried out by few of research units in their research scale. Coaching of general technical procedures serves group production and supervises their implementation.Professional TrainingProfessional training for encouraging agricultural extension is held by centre of encouraging agricultural extension (1-2 courses/year) in order to improve the knowledge and ability of the State cadres doing agriculture encouragement and people doing agriculture encouragement outside the system (the Association of Farmers, the Association of Women, the Youth Union, the Association of Gardeners, the Association of Veterans , heads of co-operatives, heads of clubs of encouraging agricultural extension). Concrete subjects usually focus on the following matters:- Organizing the system of encouraging agricultural extension.- Methods of establishing and operating clubs of encouraging agricultural extension- Methods of encouraging agricultural extension.- Introducing some new technological advancesTrainers in these courses are members of the centre of encouraging agricultural extension of the province and other members of the Department of Agricultural Extension and the Department of Personnel Administration of the Ministry of Agriculture.

Training Farmer Households to Do Business on Veterinary Medicines and Insecticides is the training form held by agencies of veterinary and stations of vegetarian protection. Households doing business on medicines want to have or to maintain business licenses are compelled to participate in those classes. We consider this an agriculture encouragement activity because after the training, these households advise farmers in the way of using veterinary medicines and insecticides.Training for improving the professional ability for members of Veterinary Technology Departments is held by agencies of the Bureau of Veterinary and stations of veterinary.Centers of domestic animal breeding hold training courses for local veterinary surgeons so that they are able to professionally carry out artificial impregnation at local level.

These veterinary surgeons are members of the board of veterinary or just those who have practiced this work in villages.According to the summary figures of the Department of Agricultural Extension, the Ministry of Agriculture and Rural Development, by 2000 the State body of encouraging agricultural extension has carried out 80,000 short-term courses for 500 million people. At the central level, the program for training courses has been invested VND3.8 billion to open 240 courses lasting 5-7 days for the programs of encouraging agricultural extension at provincial level with about 20 thousand trainees.

3. Private sector participation and supply chain coordination

3.1. Supplying capacity of commodity chains (rice and coffee)

3.1.1. Supplying capacity of rice commodity

a) Rice Area and yieldBelow table shows the development of rice production in Vietnam in the past 5 years.

Table 22: Rice production of Vietnam in past few years Year Area

(1000 ha)Productivity(hundred kgs per ha)

Output(1000 ton)

Average output of rice per person (kg/person/year)

1990 5896 32.0 19225 2911993 6559 34.8 22836 3281995 6765 36.9 24964 3471997 7100 38.8 27524 3702000 7666 42.5 32554 455

Source: GSO of Vietnam in 1991, 1994, 1996, 1998, 2001

Output of rice in the period from 1990 to 2002 grown continuously by 5.5% and this development pace is the highest number in the history of planting rice of Vietnam. This result comes from the increase of both Area and productivity of rice in last period:

b) Rice production in different zones

Although rice production develops in all ecological zones of Vietnam, the Area of rice mostly concentrates in 2 granaries Red river delta and Mekong river delta.

- In Mekong river delta (MRD): is the area occupying more than 51% output of rice and over 47% Area of rice of all the country. After 10 years from 1990 to 2000, the output of rice of this delta had increased 8 million tons, 4 times higher than Red river delta, 7 in 12 provinces of Mekong river delta have output over 1 million tons, mostly are: An giang, Kien Giang. Due to the variation of export rice market, the production of farmers in Mekong river delta provinces has been changed logically aiming to minimize risks of

market and guarantee the income of households. These changes come from 2 sides: farmer themselves and policies of government, 2 main changing tendencies are: Diversify production by adding other plants (except rice) or aquatic products to

production system. Change to produce rice for export effectively

Diversify production systemTable 23: The rotational agricultural production formulas of new plants and animals in land of rice in Mekong river delta in 2001  TotalRice – Shrimp 27591Rice – Fish 15598Rice – Maize 15945Rice – Soybean 2596Rice – Peanut 8725Rice – Greenbean 5475Rice – Cotton 661Rice – Vegetable, beans 30864Suger cane 6394Jute 4510Tuber root plants 6409Total 124768

(Source: Central department of agricultural and forest extension, 2001-2002)Note: SB: soybean; PN: Peanut; GB: Greenbean ; C: cotton ; V: Vegetable and beans

On rice field of Mekong river delta provinces, in winter-spring season in 2001-2002 over 120000 ha of specific rice land had been changed to multi-cultivation production models with high value such as : rice-shrimp, fish, rice-soybean, rice-peanut, rice-green bean, rice-cotton, rice-jute. The provinces have strong production structure change in rice field are Long An (25,519 ha), Kien Giang (23,378 ha), Bac Lieu (21,100 ha) vµ An Giang (20.496 ha).

Change crop structureThanks to research results about rice breed, the change of crop structure is one of important factors ensuring the Area and output of rice increase stably in the past years, also plays decisive role to increase total output of rice in the country. Table 24. Structure of rice Area by seasons in Mekong river delta

Rice crop1990 2000 Comparison

2000/1990Area (1000ha)

Structure (%)

Area (1000ha)

Structure (%)

Total 2578,9 100,00 3936,4 100,00 152,64Winter spring 752,4 29,17 1519,8 38,61 202,00Summer autumn 907,7 35,20 1881,3 47,79 207,30Summer 918,8 35,63 535,3 13,60 58,26Source: Informatics center, Ministry of agriculture and rural development

In the past 10 years (1990-2000), the Area of summer autumn rice and winter spring rice of Mekong river delta increased double, Area of summer rice decreased half (41,74%). Before, Mekong river delta has only 2 main rice crops: winter spring and summer, summer autumn crop is only experiment crop. However, at present, summer autumn crops rapidly becomes main crop in Southern provinces. This is short-term rice crop with high productivity. It is the effort of southern provinces generally as well as Mekong river delta in changing effectively crop structure, intensively cultivate summer autumn crop to increase the advantage for rice commodity chain.

Use high quality breedUp to 2001, in MARD , farmers had used many new rice breeds, with diversified kinds in large Area occupying 77,91% total Area of rice cultivation all the year; 76,85% total Area of rice cultivation in winter spring crop and 78,83% total area of rice cultivation in summer-autumn crop.

Table 25. Structure of rice varieties in MRD in 2001

STT varieties Planting Area

Area (ha) Rate (%)1 IR 50404 419206.91 15.152 OM 567 161866.77 5.853 OM 1490 298853.58 10.304 IR 64 vµ IR 64B 285038.25 10.305 VND 95-20 220102.55 7.956 OMCS 2000 160215.28 5.797 OM 2031 76391.10 2.768 MTL 250 40161.33 1.459 TN 128 82553.65 2.9810 AS 996 78910.52 2.8511 OM 1723 - 62 58511.65 2.1112 Jasmine 85 39632.13 1.4313 IR 65610 20711.68 0.7514 IR 56381 37224.15 1.3415 IR 62032 12149.00 0.4416 OM 1633 14065.00 0.5117 OMCS 97 34962.41 1.2618 OMCS 95(1035) 16872.40 0.6119 IR 59606 15157.00 0.55

20 Perfume rice 59925.70 2.1721 OM 997 – 6 12613.88 0.4622 IR 50404 CM 11021.07 0.4023 Other breeds 611462.87 22.09

Total 2767608.88 100.00Source: Southern department of agricultural and forestry extension, 2002

Production of high quality rice is implemented by applying rice with good quality to produce. Rice breed has good quality expressing by kinds and origin of breeds. Therefore, to localities in MRD, main duty is identification rice breeds suitable to locality and organize production certificated breed to supply for high quality rice zone8.

However, in this period, increasing the quality of export rice meet a lot of obstacles, firstly, the quality of breed seed. 98% of rice breed in the province is produced by farmers and exchange mutually but most of them were not trained production technology and lack of condition for frying, drying, particularly in summer autumn crop.

- To Red river delta (RRD): the second granary of the country, cultivation Area occupies 15,8% Area of the country and output occupies 20,3% total output of all the country. Thus, the rice output of only these 2 deltas occupies over 72% total output of Vietnam. The productivity of RRD is generally higher MRD, but the cultivation Area of RRD is impossible to enlarge. From 1990 to 2002, the rice cultivation Area is not increased (1.142 thousand ha in 1990 and 1.202 thousand ha in 2002), though coefficient of land rotation still increases. The reason in RRD there is not waste land (not yet exploited), moreover, the urbanization progress is much more rapid than MRD. So, rice cultivation in RRD mainly bases on intensively cultivation capacity: - Change potential high productivity breeds, in which, develop cross-breed rice. At present Vietnam has about 500 thousand ha of cross-breed rice each year, in which, 70% Area is cultivated in RRD.- Increase investment for intensive cultivation, se more chemical fertilize and pesticide.

c) Export and price of rice in Vietnam

Table 26. Vietnam Rice Exports

Year Export volume(1000 ton)

Export turn-over (million USD)

% Rice quality

High Medium Low

1990 1478 275,4 14,3 8,7 77,01991 1017 229,9 35,1 10,0 55,01992 1960 405,1 40,3 15,2 45,01993 1649 335,1 51,2 21,4 28,01994 1932 420,9 70,0 13,0 171995 2023 538,0 54,8 22,7 22,5

8 According to estimation, in order to produce 1 million ha of high quality rice for export, needed 12.000 ha of certificated rice in 2000 and 18.000 ha in 2001.

1996 3038 868,4 49,0 13,0 38,01997 3531 891,3 44,0 8,0 48,01998 3721 1000,5 - - -1999 4514 1003,5 41 17 362000 3263 668,2 42 26 242001 3350 550 41 17 362002 3200 590 40 30 20Source: Agrarian System Department, summary from many sources, 2003

Vietnam rice export has developed both in physical volume and export value. The year 1999 marked the development of the commodity by the world second position in rice export with the quantity of 4.5 million tons and over 1 billion USD. However, the period from 1998 to 2001, export rice price decreased so the increase of export turnover is lower than physical volume. To early 2001, the price of rice 5% broken rice of Vietnam is only 150USD per ton (half of the price in 1998). Main reason of this decrease is the import demand of some countries decreased, meanwhile other rice export countries, especially Thailand improve subsidize methods to decrease the rice price and increase the competitiveness in international market. In 2003, the price of rice is high and relative stable from 1.500 to 1.700 VND per kg. Besides, situation of rice export is very positive. In 8 months of 2003, Vietnam had exported over 3 million tons of rice with export turn-over 522 million USD (market Indonesia 24%, Philippine 16.7%, Malaysia 10 %, Africa 16.5%, Middle East 11.6%, Cuba 7.3%, Russia 2.8%) are factors important to promote production and exportation of rice recently. According to latest forecast of FAO, exportation of rice of Vietnam can reach 4 million tons, exceed United states and India to return 2nd position of rice exportation in the world in 2003.

Regarding to consuming market, Vietnam rice is consumed mostly in Asian, Middle East countries. The export rice amount of Vietnam to Asian countries usually occupies over 50% total. The Asian countries who mainly import Vietnam rice are Indonesia, Philippines, Singapore, Malaysia vµ Honking. Middle East countries such as Iran, Iraq are also big market for Vietnam rice. In 2000, the export rice amount of Vietnam to Middle East occupies 30% total. Middle East is a big and stable market, so Vietnam has to occupy this market by increasing competitiveness of rice with Thailand, increase international marketing activities.

Table 27: Export rice of Vietnam by year and zone Zone 1995 1996 1997 1998 1999 2000 2001Asia 66.2 45.4 35.0 62.6 67.1 55.7 51.7Middle East 7.0 21.5 12.3 13.3 15.0 31.2 20.1Europe 10.6 21.9 41.2 18.7 14.6 10.3 13.8America 15.6 10.9 9.6 4.5 0.6 2.1 1.7Ocean 0.6 0.2 1.5 0.9 0.0 0.7 0.1Africa 0.0 0.1 0.4 0.0 2.7 0.0 12.6

Source: Information center-MARD, 2003

According to information of Ministry of trade 2003, now, Vietnam has just had 4 more rice export markets: Japan, Belgium, Senegal and South Africa. In rice export activities this year, it is the first time; Vietnam penetrated the rice market of Japan by tender. In the opinion of commercial consultants, the amount of export rice of Vietnam now increases strongly due to the increase of quality and favored by international market. The price of export rice of Vietnam is continuously increasing in near future is positive signal for the actors participating in this commodity. With the above amount of export rice of all the country, output of MRD contributes about 90%. Therefore, rice exportation of all the country influences directly to farmers in MRD. Other areas are less influenced by export output and price.

3.1.2. Supplying capacity of coffee commodity

a. Coffee productionVietnam has climate and geographical conditions suitable to the development of. The hot, wet, tropical, season wind climate of southern Vietnam is suitable to Robusta coffee. The climate of Northern Vietnam with cold winter and drizzly weather is suitable to Arabica coffee.25 years ago, the issue of development of coffee was mentioned, mainly in Dak Lak, Gia Lai and Kontum provinces in Central highland. At that time, the country had only 20000 ha of coffee with low yield and the total output was only about 4000 – 5000 tons. During the last two decades, coffee in Vietnam had developed significantly. The coffee output for the whole country increased some hundreds times. Up to now, there are above 500000 ha, with total output reaching 900000 tons. The Area of Vietnam coffee began to increase in middle of 80s decade of 20 century. Reason causing these results firstly come from renovation policies of the government suitable to expectation of farmers is that make rich in their own land with their own labor. The price of coffee in international market recently is high, favorable for coffee producers, increasing the income of farmers. The attraction of high price is most powerful motivation promoting the development of Vietnam coffee. From 1992 to 2001, the output of coffee in Vietnam increased continuously, but since crop 2001 – 2002, the output of coffee began decreasing. We can see that the overdevelopment of coffee commodity in Vietnam by the figures of Area and output in last 9 years:

Table 28. Area and output of Vietnam coffee Crops Area (ha) Output (ton)

1992/93 140000 140400

1993/94 150000 181200

1994/95 215000 211920

1995/96 295000 236280

1996/97 350000 342300

1997/98 410000 413580

1998/99 460000 404206

1999/00 520000 700000

2000/01 500000 900000

2001/02 612000

2002/03 550000

Source: www.vicofa.org.vn 2004The decrease of output of coffee caused by 2 reasons as follows: Change some area of coffee to other plants because of the low effective of coffee. In

Dak Lak, the province specialized in coffee, 60% of total coffee output of all the country, had changed 40000 ha of coffee to cocoa, pepper, rubber, fruit trees, maize, cotton etc.

Decrease investment due to lack of capital, fertilize, irrigation etc. With total Area over 500000 ha and the output of 10 millions bags per year, coffee now is ranked at second place after rice in list of export agricultural products of Vietnam. In order to reach such high output, coffee commodity of Vietnam yearly attract about 300000 households, with over 600000 labors, especially in 3 harvest months, this number may reach to 700000 or 800000. Thus, number of labor in coffee commodity reach to 1.83% total labor in all the country generally and 2.93% total labor in agricultural sector. Besides, about 1 million people have impact of coffee production.

b. Coffee export and price The table shows that the rapid development of exportation and the decrease of price:

Table 29. Output of exportation and average price Crop year Export (ton) Average price (USD/ton)

1994/95 212038 2633

1995/96 221496 1815

1996/97 336242 1198

1997/98 395418 1521

1998/99 404206 1373

1999/00 653678 823

2000/01 874676 436,6Source: www.vicofa.org.vn 2004

In the crops from before to 1998/99, output of export coffee yearly is not very big. But in 2 crops 1999/00 and 2000/01 each crop increase above 200000 tons equivalent to 3,5 million bags, and export price of these 2 crops is very low, approximately 60% the price of preceding crop. This situation provides coffee cultivators and export enterprises with a lot of difficulties, and if this tendency maintains, farmers and enterprises surely can not stand. The unavoidable results is that farmers will abandon, do not look after coffee because they can not afford and they also will not harvest, even they will cut down coffee to plant other trees. Due to the coffee output increases a lot, and coffee price decrease, the exportation meets many obstacles and causes a number of conflicts about contracts, and complaints. International coffee organization (ICO) recommended export coffee countries to decrease the output and regulate strict standards about export coffee, terminate bad coffee, etc. But this is another problem: a lot of enterprises exporting coffee admit that increasing the quality of coffee is a vital demand but in fact there is not stable market for high quality coffee. An other difficulty of producers is that the cost to produce high quality products usually adds 30-40 USD per ton (including transport cost to factory, decrease impurities, decrease broken coffee etc) but exporters only accept the disparity comparing to normal coffee about 20 USD per ton.In order to help coffee commodity of Vietnam exist and develop sustainable, most importantly, there is a complete strategy for coffee commodity chain in production, commerce, solutions and commodity management organization. The government needs to point out the direction for coffee commodity and the adjustment is a duty needed to be done immediately to coffee commodity of Vietnam.The overproduction crisis of coffee now effects negatively to coffee commodity chain of Vietnam. However, beside the negative sides, there is a positive point, that is the coffee cultivators understand their shortcomings and can choose more exact way to develop.

3.2. Producers Organizations

a) Progress of changing and building cooperatives (coop) in agricultural sectorSituation of development of cooperative in agriculture in the past years remarks by 2 progress: First, changing from old model of cooperative to new model of cooperative of service and second the establishment of new cooperatives. To December 2003, in agricultural sector in all country there are 8891 service cooperatives in which new 1689 cooperatives, 6069 cooperatives occupying 84% is old model cooperative changing to new operation mechanism. The rest 1143 cooperatives are cooperatives of non-agricultural in rural. With changed cooperative, most of cooperatives are modified and supplemented the issues of old model of cooperative that not suitable to law such as: property and capital of cooperatives are checked and assessed, public assets are delivered to people’s committee, the rest is delivered to new cooperative and calculated as initial contribution of cooperative members. These cooperatives also have to design business plan to solve loans etc.

New model of cooperative in specialization and professionnalisation

From four years, with supports of cooperation between Agrarian systems department of VASI and others French institutes, tens cooperatives specializing in high quality of pig production were established (20-40 members per cooperative). These cooperatives were considered as a unit of coordination for farmers in collective’s actions in input, production and output. All farmers of cooperative are the same technical process of production, so their products are similar in quality. Cooperative function is the common purchasing in input, the control of technical process production, the coordination of credit from bank, and collective in output. There kinds of cooperative can support economic farm in their production and improving the quality of products by developing auto-control in their production. In other hand, cooperative can increasing the scale of production in input and output by farmer’s collective is actions. This kind of cooperative is testing successfully in perfumed rice in Hai hau, seed production in Haiduong and Vinh phuc, aquaculture in Ha duong, vegetable and cow production in Hanoi, Haiduong and Bac ninh…, the MARD and many provinces appreciate and want to support development specialization cooperative to help farmers integrating in markets.

b) Develop diversified the organizations of producers

Beside above coops, there are many kinds and models of farmer organization established and developed aiming to support households economic as well as the economics of producers in rural generally.

Table 30. Number of farmer’s organizations Model North VN Central VN South VN Total

Kinds of club Agricultural extension groups Cooperation groups Interest groups

71010

4006.215

38100

115

98036.900

54516

2.07136.910

9456.346

Sum 7.335 496 38.441 46.272Source: Department of agricultural and forest extension- MARD, 2002

So, agricultural extension groups develop strongly in south VN meanwhile interest groups develop in north VN.

3.3. Roles and activities of farmers’ organization

The organizations of producers in rural in the past years play more and more important role in the development economic of members. Strong point of these organization is that develop the advantages of economic of scale, increase effective in participating the market of households. These organizations implemented a lot of different services for households and their members like organize their member to educate and exchange experiences, implement some service for production such as supplying inputs, consuming products etc. However, comparing to potential and expectation goals, the results of farmer’s organizations are still very limited, particularly in consuming products and supporting to supply information to farmers to produce and participate in market. Many

organizations are not professional, so the results are not good. A lot of organizations do not protect the benefit of their members. Information and train farmers Farmer organizations are key factors in localities and the address for professional offices such as agricultural extension, companies, institutes etc conduct technology transference. In the past 10 years, Ha tay organized 4472 training courses with 227264 participants. The contain of these training courses are intensive cultivation, intensive husbandry, introduce, propagate new techniques, experiences in economic management, market knowledge, changing plant structure, experiences of good producers etc. The participants are much diversified. Beside farmers (over 90%), there are management officers, technical staffs of agricultural coops, basic agricultural extension workers, farm owners, key farmers, staffs of social organizations such as farmer union, women union etc. The results are that increase the knowledge about technique, science of most of the farmers facilitating to technology and science transfer to production.

Organize productionAgricultural coops and farmers organizations conduct a lot of different kinds of service, but the capacity to conduct 1 or multi service are different among farmer organizations. Kinds of service include: irrigation, soiling, pluck rice off the ears, supply materials, supply breed animals and mainly conducted by coops in north VN. Among above services, irrigation service is main activity, most of coop conduct from 1 to 2 kinds of service. The service of soiling, plucking rice, supply materials are not often conducted by coops.

Consume products Coops and producer organizations in south VN develop more strongly in consume product activities. In south VN, there are 2 main products in coop: rice and aquatic products. To rice at the moment, the consumption is conducted by the middle role of coop in contracts with export company. Coop is representative in making contract with company. Some few coops have functions in collecting, processing rice of members and supply for export company. Some other products such as rocket maize, coop is the middle man to collect and make fresh etc and transport to factories. To aquatic products, coop is representative to make the contract to consume products with export company, besides, there are 2 coops having the function to search market and organize to collect and sell products in main markets. So, the role of coop in consuming products can be briefly described: The middle man between market and farmers through official contract or non-contract duels, collect, preliminary treatment and transportation. However, at present, most of coops are only representative in making consuming contracts. Beside function of organizing production and consuming products, coops have the role to facilitate farmers get loans for production. Coops make the lists of farmers who have demand to receive loans, check the mortgage conditions (house, field, etc) of households to help banks to give loans.

3.4. Non-government organizations

Generally, the number of NGO operating in Vietnam is very little, especially in rural areas. The organizations operating development in Vietnam at present mostly are foreign NGO. Today, there are over 200 different NGO operating in various rural sectors. Some foreign NGO had helped localities build agricultural extension models and voluntary agricultural activities. In which, there are Vietnam- Sweden mountainous rural development program implemented in 278 hamlets, of 76 communes of 17 districts of 5 provinces Lao Cai, Yen Bai, Ha Giang, Tuyen Quang, Phu Tho; the assistant programs of Oxfam GB, Helvetas, ADDAIPM, CIDSE, SNV, FADO/FOS etc. These organizations mainly help farmers in distant areas, poor farmers etc the way to produce, eliminate poverty, develop economic, society.

3.5. Policies supporting the development of private enterprises

Policies to develop private enterprise and rural sector - Decision number 132/2000/Q§-TTg (24/11/2000) of Prime minister about encouraging rural sectors: "Government protects legal right, protects the possession of property, know-how, copy right, industrial possession, industrial styles of individuals, organizations invest to develop commodities in rural areas. Encourage and facilitate organizations, individuals mobilize social resources to implement activities of assisting, consulting, informing, marketing, training, agricultural extension, technology research, styles, models for development in rural areas".

- Decision number 352/TTg (28/ 05/1996) of Prime minister about promoting agro and forest products and commodities in rural areas.

Contain: (i) Build the plan, programs and projects to develop about processing, storing agro products, forest products, mechanize agricultural, forest, irrigation sectors etc (ii) apply new technology and science about processing, storing agro products, forest products, mechanize agricultural, forest, irrigation sectors etc.

Policies to support finance, credit and input investment. - Inter Circular between Ministry of science, technology and environment and ministry of finance number 2341 /2000TTLT/BKHCNMT-BTC date 28/11/2000 guiding the implantation of decree number 119/1999/N§-CP date 18/09/1999 about some policies of finance encouraging enterprise invest in science and technology activities.

- Circular 84/202TT-BTC 26th September 2000 guiding about financial issues encouraging rural commodities development. Decree number 14-CP (2-3-1993) of government about policies for producers get loans to develop agro-forest-aquatic-salt industries and rural economy: "Banks and credit organization extend kinds of short-term credit directly to producers, gradually extend medium and long term loans to develop long term plants, raise cattle, purchase equipments, renew technology, develop rural industry etc"

3.6. Production contracts and linkages among actors in the commodities

In 2002, the government made Decision 80 (date 24/6/2002) about encouraging consumption of agro products by contracts, in other words, the guideline of this decision aiming to encourage the participation of actors, particularly authorities at different levels in supporting farmers to consume their agro products.

3.6.1. Vertical cooperation among economic actors in rice commodity in An Giang (Research results of Agrarian systems department of Vietnam agricultural science institute, 2003)

In An Giang, the linkage among actors in production and consumption of products is one of new institutions partly contributing increasing effectives of actors’ participation, firstly farmers. Briefly described in following diagram: New institution in rice commodity of An giang is established by the linkage among 4 actors basing on the contract among them: enterprise of processing and export rice and farmers. Enterprise pay in advance about capital, materials, technology to farmers and buy rice of farmers. Summary in 2 ways:1. Through contract (made between coop and enterprise), farmers of coop producing high quality rice can sell directly to enterprise. The price in contract is floor price (not lower than 1300 VND per kg) 2. Through contract made between coop and enterprise fixing floor price. Farmers sell rice to coop and coop collects and rebuys to enterprise by its money or commission. Rice can be processed primitively or not be processed.

Results (season winter-spring, 2002-2003): In the way 1, there are very few farmers obeying the contract (estimating about 10%)- only concentrates in the Areas which are invested breed and materials, and usually special rice. In many areas, farmers do not obey the contracts.In the way 2, about 100% farmers obey contracts. Today, in An giang, only a few coops can manage these functions. The linkage among 4 or 5 actors (bank) is still an issue needed to discuss largely. In fact, the linkage is implemented basing on ensuring the benefits of participants and the common contribution for the common development. Therefore, the participation of bank in order to promote the linkage and ensure the benefit of the bank is considered. However, the government has promulgated a lot of policies in the implementation, in which there are some policies relevant to preferential credit, partly manifesting the role of bank in this linkage.

3.6.2. Vertical cooperation among economic actors in sugar cane in Thanh hoa (Research results of Agrarian systems department of Vietnam agricultural science institute, 2003)As above mentioned, now, farmers planting sugar cane in Thanh hoa at present sell 100% products directly to companies by contracts signed at the beginning of crop without traders like Quang ngai. These farmers usually cooperate into groups, teams or coops to sign contracts. The way to consume sugar cane from households to company showed in diagram:

Because the limitation of time, we only describe the model of organizing for production and consumption products between farmers and Lam son sugar company to show the linkage among actors in sugar commodity in Thanh hoa. At present, in Thanh hoa province, there are 3 operating sugar companies: Lam son sugar company, Viet Dai sugar joint venture company, and Nong cong sugar company. The total Area of sugar in the province in 2002 is 28.728ha, with the output 1.613.940 tons. Among them, the material zone of Lam son sugar company is about 18.000ha large locating in 9 western highland districts of the province: Tho Xuan, Ngoc Lac, Thuong Xuan, Nhu Xuan, Lang Chanh, Ba Thuoc, Cam Thuy, Yen dinh, Trieu Son (87 communes and 4 state-run farms).

4. Natural resource management

4.1. Exploitation and using of sustainable natural resources

4.1.1. Situation of water natural resources management

The total amount of Vietnam's water flow is about 880 km3 and the total amount of recycled water is 376 km3, equal to the average number value per head of 5,000 m3/year, a little bit higher than the average level of Asia - Pacific Ocean (4,410 m3/year). In the total of using water, there are 70% used for agricultural production and 30% for other activities such as for life or hydroelectricity…

Besides, considerably, there are about 1 million hectare of fresh water Area, 400,000 hectare of brackish water Area and 1.4 million hectare of rivers and streams Areas, meanwhile, we only used 30% of these Areas for rearing and growing aquatic products.

a. In general, quality of water is not too bad but the threat of recession and pollution of water natural resources is increasing:

The recession and pollution of water have many reason:

Possibly the Vietnam's climate characteristic is the first reason: the high evaporation may possibly reach to the percentage of 20% so that it will reduce the amount of water Area.

The river or lake beds are polluted by the accumulation of alluvium and sand. Alluvium of rivers on the one hand brings nutritious profit for crop plants, but on the other hand, it has restriction that makes accumulation for river and lake bed, especially at the lower areas, it even obstructs the traffic.

Pollution by industrial and city sewage is increase more and more. Most of industrial and city sewage, which is not being processed, has been directly poured into rivers, canals, ditches, lakes or ponds, and this leaded to pollution. For example, on the Sai gon river and Thi nghe river, the capacity of nitrogen and phosphor is from 4 to 200 times higher than the standard level for water resources

type A, and from 2 to 20 times higher than the standard level for water resources type B.

Pollution of agricultural production is the result of not observing the technical process in using organic fertilizers and plant preservation chemical substances. For example, at the high intensive areas of crop plants and animals, the capacity of nitrogen, DDT, Lindane is higher much more time than the allowable threshold. Especially, the quality of agricultural products will be seriously affected when irrigative water is polluted. Researches of Plant Preservation Institute showed that, the surplus substance of Methyl parathoni is 2 - 3 time higher than the allowable threshold of FAO.

There were not only the problem of polluted water area, the excessive exploitation and unobeyed technical process also polluted the underground water, this leaded to phenomenon: lowering the level of underground water making the water is salt, polluting stratums.

b. People only paid attention to managing and exploiting on quantity but they have not considered the exploitation on water quality yet

This is a reality because the water quality is being worsened. The most reason for this is that the management on sewage water is not tight, especially with industrial sewage water and living sewage water. In Red River Delta, the water quality is appreciated rather well on the angle of chemical quality. However, the concentration of sewage is sometimes still rather high in the rivers or drains which contained industrial sewage water and city sewage water. This delta has high population and high urbanization speed in comparison with the other regions overall country, so that, it is in the danger of water environment pollution. Regret that there is still a little solution to reduce water pollution. Meanwhile, the alluvium at the rivers is the good nutritious source for improving land and cultivating plants, but the technical methods for exploiting these alluvium sources are not much. But in Mekong River Delta, when the irrigation building are still placed inland develop more and more, the threat of salt-marsh at the delta side is also more and more.

4.1.2. Situation of land resource management

Land resource of Vietnam is appreciated rather small and limited. Vietnam is ranked into nations that have the smallest average land per head on the world; moreover, the population is distributed unequally, concentrated most at the rich land delta areas.

- Agricultural land:

In the pass year, the change of agricultural land mainly followed these trends:- Losing agricultural land because of urban development, building industrial - service zone, building infrastructure (transportation, irrigation,...). According to Institute of Planning and Urban Designing, with the current urbanization speed, Vietnam lose about 3,800 hectare of agricultural land per year in order to change this land to other non-agricultural purposes.

- Diversifying cultivation production: change from 2-crop land to 3-crop land, change from 1-crop and 2 unstable crop land to 2 stable crop land… Appearing many specialized areas, agricultural commodity production areas have abundant crop plants systems. - Changing bad effect land to higher using effect: changing one part of high land which is passive in water to use for planting fruit trees; changing one part of low land to high effective production models: 1 rice - aquatic products, 1 rice - aquatic products - fruit trees (combination with breeding development); changing alluvial ground at the edge of sea from rice and rush production to rearing and growing aquatic products (shrimps, crabs); Changing one part of rich alluvial soil river side to cultivate mulberry and raise silkworm; Improving poor garden, developing fruit trees.- Reclaiming virgin soil and restoring waste land to enlarge agricultural land Area: Using alluvial deposit land at the edge of sea and unused water Area land for rearing and growing aquatic products, etc.- Using agricultural land more and more sensibly, effectively and sustainably, farmers apply progressive technical formulas for crops, animals and use crop rotation methods; have combination between agriculture and forestry, etc.- However, some agricultural land areas were gradually polluted because of sewages and chemical. The reason for this is the development of industry in the area and the evasion of sea, besides, the chemical compound used for production was not sensible at some areas also leaded to the pollution of agricultural land. This is the problem needed to be solved in the future.

- Forestry land and wood land:

Forestry land and wood land Area is in danger of being decreased in recent years, parallel with it is the decrease of forest quality. According to GSO 2002, the natural forest Area had been decreased from 14.3 million hectare to only 10.915 hectare, while the Area of newly planted forest is only 1.471 million hectare now. The cover ability of Vietnam forest is about 32%, a bit higher than the average level of the world (27 - 28%) and forest quality tended to decrease through the time (Central Ideology and Culture comity of Party and Ministry of Agriculture and Rural Development, 2002). The State and Vietnam Government have pursued the program of 5 million hectare planted forest for many years, however, the Area of planted forest is rather small, only about 60% - 75%.

The Area of fallow lands and ball hills is rather large, about 8.3 million hectare, make up 25% of the whole country Area, these lands and hills mainly concentrated at the North mountainous areas (about 4.3 million hectare), next is North Central Coast and South Central Coast, about 2.8 million hectare.

4.2. Environment and production technology for protecting environment.

Sensibly and effectively exploiting natural resources is the target that Vietnam always tries to pursue, in which, science and technology are used as the tools or solution for increasing production effectiveness and environment protection. Hereafter are the preferable trends and achievements in the past year:

4.2.1. Cross-breeding crop plants, animals in order to get high productivity and prevent pest or insect.

In agriculture, the result of science and technology activities often had a new development step after each year, especially for the progress of science - technology in cultivation production. Concretely, according to Ha Quang Lap- Vietnam Agricultural Science Institute, from 1990 to 2000: * Ministry of Agriculture and Rural Development acknowledged 84 rice seeds, in which 45 rice seeds at the North; 15 bulb plant seeds such as sweet potato, potato, cassava; 20 seeds of bean and peanut (all at the North) .* Acknowledging delineating areas for 46 crop plant seeds and production process of 2 strain cross-rice and 3 strain cross-rice, self-producing cross seeds to apply 20% domestic demand.* Suggesting to be acknowledged 2 cross-maize seed which is soon ripen and medium ripen, these seeds can resist bad conditions so that it can apply the change of crop structure. * Fruit tree seed: Experimenting on 4 imported seeds and local excellent seeds that had been chosen.* Industrial trees: selecting 29 excellent asexual rubber strains, 5 rubber seeds that had prospect on increasing latex productivity and growth ability; bring 4 asexual strains into production, crossing 3 asexual strains and recommending 2 imported strains PB 280, PB 312. Bring 4 high productivity coffee strains into production at the Central Highland, testing 3 other coffee strains. Selecting 2 tea strains 215 and 276 and the sudden change tea 5.0 that has good quality and high productivity. Selecting 20 high productivity seeds was using into production.Acknowledging and bringing into production 3 asexual cashew strains PN1;LG1,CH1.In animal husbandry, progress of science - technology in animal breed had been acknowledged were: creating masculine and feminine gender strain for breeding pig herds Yorkshire, Landrace and Duroc, etc. Acknowledging and bringing into production the lean 57.5% hybrid pigs Landrace, Yorkshire and 12,5% domestic pig Mong Cai: 3 hybrid pig (Duroc x Landrace, Yorkshire) ( Pietran x Landrace, Yorkshire) and 4 hybrid pig (Duroc, Pietran x Landrace, Yorshire); the chicken strain 882 and Jangcun; the chicken strain ISA-JA 57; hybrid combination Kabir x Tam hoang; hybrid combination Kabir x female Ri; the chicken strain Kabir CT3; the chicken Tam hoang grandparents 882; the hybrid chicken combination BT2; the duck strain V5, B6; the supper heavy France goose strain.

4.2.2. Developing and exchanging safe production technology to production, building an agricultural base oriented to ecological and sustainable agriculture.

The reality in the last 10 year had proved that: - We had ability to approach new technology such as marker molecule, transplant gender, process of selecting and multiplying sterile strain CMS, TGMS in cross-rice production, technology in growing and culturing soma cell, micro-graft growth peak. Besides, we could also bring into production the technology in animal husbandry: culturing germ, cutting cow's germ, bee artificial insemination, imported 73,858 origin breeds and grandparent's level breeds of pigs, dairy cows, milk goats, ducks, and pigeon.

- Completing and using some new technology: cross-rice seed production technology; tissue culture technology; cross-potato and clean potato production technology; especially the technology in producing safe vegetables and fruits.The results after ten years of economic structure transition (1990-2000) showed that: 49 new progress in cultivating technique, 10 production process were considered by the Ministry of Agriculture and Rural Development as technical progresses to be applied in actual production.

4.2.3. Enlarging the national IPM program

Vietnam has implemented this program for many years. Some ten thousands of farmers have been trained at all sides on the whole country. Next time, Vietnam is going to continue this program with the participation of official extension, spontaneous extension system and even foreign organizations.

4.3. Production certification

In Vietnam, the certification for products producing in respected environmental condition is not developed. In the legislation, there are not low or decision from Government to promote products comes from good environmental area. For economic actors, they do not interest to use image about environment in label.

4.4. Environment policy

4.4.1. Environment preservation law

Environment preservation law was ratified by the National Assembly for the first time on December 27th, 1993. Documents under the law were also promulgated in which included of Decree No175 CP (October 18th, 1994) to guide to carry out the law and Decree No26 CP (April 26th, 1994) on administrative violation punishment related to environment protection. Besides, there were many other documents of the Government and Ministries to regulate the concrete implementation and criteria related to environment evaluation, environment standard, observation and examination, sewage management, building and managing preservation areas, protecting biological diversification, etc.

Besides the environment law, there were also many other laws regulated problems of natural resource protection such as land law (modified in 2003), forest protection and development law (1991), minerals law (1996), petroleum and gas law, natural resources law (1998).

4.4.2. System of environment management

Being organized to be the official system for the first time in 1993 with the participations of environment ministries, departments, services from central to environment departments at provinces. A network of environment observation, testing and analysis stations had been invested and established as the first step. Up to 2003, the integration

between environment management systems with the General Department of land office to build Ministry of environment natural resources continued creating chance and condition to perfect the management system of natural resources and environment.

However, at the local level from districts to communes, villages, there have not official actors to undertake the environment problems. This work is assigned for the local People Committee and some other services (community health service centre, Crop plant preservation station or the commune medical aid station...) to concurrently carry out each field of works. Thus, it is difficult for the problem of environment management at the local now.

4.4.3. Plan for protecting Biological Diversification (PPBD)

This plan was ratified by the Prime Minister in the Decision No 845/TTg on December 22nd, 1995. The impending targets of this plan are: Protecting the particular ecological condition of Vietnam Protecting organs of biological diversification in danger of excessive exploitation or

being oblivious Developing and finding out utilizable value of organs of biological diversification

basing on promoting durable value of natural resources in order to apply the country economic goal

4.4.4. The national strategy on environment protection (NSEP)

The instruction No 36/CT-TU of the Central executive staff, Vietnam Communist Party, regulated principles need to be obeyed when establishing the national strategy on environment protection:

NSEP do not separate from the social - economic development strategy of the country NSEP must base on present condition analysis and development trend of the country

in the period of industrialization and modernization. NSEP must be appropriate to the country's resource of force. NSEP must base on experience of many nations about problem of science,

technology, economics to solve environment problems effectively. NSEP must have legal base in order to expand the country's medium and short-term

plans as well as to absorb foreign investment NSEP promote the spontaneousness and the decentralization in environment

management.

- Target strategy NSEP: Taking precaution and examining pollution. Permanent protecting and preserving natural resources and biological

diversification. Improving environment quality at cities, industrial and rural areas.

5. Risk in agricultural production and resolves

5.1. Production’s risk

Although there has been remarkable achievement, Vietnamese agriculture is now facing many ordeals. Some risks have ascended and caused more and more threatens to production. Types of risk can be distinguished as follow

5.1.1. Regression of production’s resources

a. Land and environment

Land used effectiveness in Vietnam is quite low with rate of 1.6 time annually. Productivity of most crops plants is low and unstable. The country cover an area of 25 million hectares (account for 76% of total square) of slope hard land with disadvantages for cultivated, including more than 12.5 million hectares of hard land; and over 50% square of land in delta areas are of disadvantage issues

Table 31: Problem of agriculture land in Vietnam (Source: VASI, 2003)

Type of land Area (million ha)1. Slope hard land 25,02. Alum hard land 0,823. Sand land 0,544. Exhausted land 2,065. Hard erode land 0,506. Erosion stone land 0,247. Inundation swampy land 0,478. Low cultivating stratum land 8,5

Recent collected data show that, land degradation is the general trend happened in all wide-range areas, particularly in mountainous areas. The state of saltilised, aluminized and swampilised have been happening in million ha of scale in many delta zone that caused a standstill in land’s productivity. Coming with land degradation, system of fauna and flora as well as local environment are undertaking a regression, leading to the fatal reduction in average agricultural land used per capital.

Fertilizer used for each hectare cultivated is low (80 kilogram per hectare in comparison with 87 kilogram of world average figure). This quantity of fertilizer can make up only 30% of nutrition used by cultivated plants. The unequal used of artificial fertilizer have also happened popularly. Thus, fertility of soil, lack of essential elements such as kali, sulphur... causes a decrease in productivity of plants. Flora protected chemical products are of overused and improperly controlled. Among 200 products used in the Northern areas, more than ten are forbidden ones. The pollution happened in environment and agricultural products due to high short for using plants protected products, especially for vegetables and fruits.

b. The phenomena that water being soiled and shortage Water pollution caused by sewage (coming from life and industrial) occur seriously in big cities and industrial zones. In some areas as Red River Delta and Mekong River Delta, they have warned the situation of water pollution due to agricultural activities. Level of pollution exceeds the permitted limit for 3 to 10 times.

c. Risk of natural disaster and diseasesThese risks are of great consideration, but human capacity to prevent them is very restricted. Diseases, floods have happened in all Northern, Central and Southern areas and tend to increase. Reasons for the increase can be listed as follow:

- The complicated in weather development.- Unprogramming in resources exploitation.- Feeble infrastructure which cannot meet the demand for preventing disaster.

5.1.2. Hazard of reducing comparison goodwill in agricultural production due to state of rag cultivated areas

Vietnamese agricultural production is characterised as rag in producing scale of farmers, till 2001 there was over 70% of farmer’s households having less than 0.5 hectare of cultivated land.

Table 32: Scale structure of farmer (%)Types 2001 1994 2001/1994

Farmer with no land 4,16 1,15 3,01< 0,2 ha 25,15 26,95 -1,800,2 ha - 0,5 ha 39,19 43,96 -4,770,5 ha - 1 ha 16,42 16,23 0,191 ha - 3 ha 13,06 10,52 2,543 ha - 5 ha 1,57 0,98 0,595 ha - 10 ha 0,4 0,19 0,21>10 ha 0,05 0,02 0,03

Source: GSO of Vietnam, survey of agriculture, forestry and fishery 2001 -2003.

The situation of rag in cultivated land leads to a hazard of reducing comparison goodwill in many different areas. We hereby give an example shows the reduce of goodwill in Red River Delta (RRD) in comparison with Mekong River Delta (CRD) because land square per household in RRD is lower than in CRD.

With small square of 857 hectares of cultivated land, the increase in population, particularly in agricultural (13.7 million in 2001 and 13.3 millions 1995). Thus, land square per capita becomes smaller, leading to the reduction of RRD goodwill, especially in the context of competitiveness in domestic and foreign market. This reduction comes from 2 main reasons: Firstly, small scales of producing make it difficult to adapt with trend of dropping products’ price; secondly, with small scale, costs of manufacturing and products circulation.

Due to a crowded population and a small square of land, each farmer in RRD has only 550 m² of cultivated land. Annually, an approximate square of 900 m² (or 0.09 hectare) land are used to grow rice, compare with 0.29 hectare in CRD. Assume that rice price in these 2 deltas is equal, due to this difference in square cultivated, income from growing rice in RRD account only for 42% of income obtained in CRD. If price reduce, minimum income of RRD farmers will be affected more than in CRD. In this case, to get an income of 0.67 million VND, equal to it in RRD, farmers in CRD adopt to reduce more than 40% of current rice price. In fact, price in RRD is 15-25% higher than in CRD at the same time. However, with the on-going freedom of circulating products, this price difference is becoming shorter and shorter. In other words, small scale of land cultivated in each farmers fields create the reduction in goodwill of comparativeness and competitiveness, happen in RRD among traditional products such as rice, maize, potato...in the context of free trade. To lessen this disadvantage, macro policies are needed to support farmers in small scale of producing in RRD, as well as stimulate the development of typical products keeping with local ecologic (fresh vegetables, plants originated from temperate zones).

5.2. Market risks and competitiveness

5.2.1. The separation in agricultural products domestic market and the unstable in market prices

The economic or market oriented mechanism was re-established in the Northern in the late of 1980s, in the context of renovation in the national economic. The state has withdrawn gradually its role in directly organizing products exchange, trade... especially in domestic fields. The newly established market system, of multi-actors, multi-sectors in which the private sector plays the key role, have replaced the old system. There is variety of products with different scale, method of exchange... we can distinguish them into 3 types of commodity chain:

1. Short chain supply for local demand: Producers local small collectors consumers in rural area.

2. Short chain supply for urban areas (sub-urban): Producers local small collectors small urban retailers consumers in the urban.

3. Long chain supply for urban areas: Producers collectors local merchants urban merchants urban retailers consumers in the urban.

This market system have developed rapidly and contributed remarkably in the development of delta areas’ production. However, it still exists a situation of separation and therefore this market system is of proper effectiveness. The diagram below shows the fluctuation in porkers’ price among different domestic market at the same period, data supplied by State Committee of Price Management. The research pointed out that price’s change varied through different markets, especially in years of 1997, 1999. The reason for this state is that commodity chains in RRD operate independently with lack of coordination. Pig products in markets of Hai duong, Hung yen, Bac ninh, Hai phong are sold mostly for local demand and Hanoi consumption while that of Nam dinh, Thai binh are for markets such as Vinh, Thanh hoa.

The research also indicated that interest rate archived by trading activities is quite low. Actors in circulation stage do not have much profit, difference between price sold by farmers and last consumer’s price is 5-10% for local market and 15-22% for urban market (see table below). This small difference creates benefits for consumers (getting low price) but does not stimulate quality improvement (undertaken by farmers). Thus, products sold are only of raw ones without good processed and packaged.

Table 33: Price of rice and pig products in 2000 in two commodity chains

PriceRice Pig

Price (VND/kg)

Increasing price %

Price (VND/kg)

Increasing %

1. Cost of production 676 - 8280 -2. Price quoted by farmers 2130 100 8480 1003. Retail price consumed by rural demand 2230 105 9180 1084. Retail price consumed by urban demand 2440 115 10370 122

Source : ECOPOL Project - Vasi, Cirad, 2002.

5.2.2. Competitiveness of some exported products

Competitiveness is an essential element in the exportation capacity of agricultural products. In Vietnamese commodity chain of water rice, a major exported product of its agriculture, competitive goodwill has reduced sharply in recent years. Analysis composed by International Food Policy Research Institute (IFPRI), rice production costs in Vietnam is of the lowest one among global average figure, with considerable goodwill in international trading. This can be seen in small rate of Domestic Resource Cost (DRC), especially in CRD. In period of 1995-2000, this figure was 0.42 in CRD and 0.7 9 in RRD approximately. In 1998, due to regional economic crisis, demand for importing rice increased pushing up price of rice exported, thus rice exporters such as Vietnam, Thailand could managed to get many benefits. Therefore, DRC of rice producing in 1998 was very low, 0.33 in CRD, which means that 33 VND of production cost would create 100 VND of income obtained by exporting10.

However, in recent years, world demand for water rice tend to reduce and fierce competitive in exportation market has caused the decrease in Vietnamese competitiveness. Compare with 1995 figure, competitive index of water rice products reduced about 50%11, even though this index increased suddenly in 1998 with the regional crisis. Main reasons are (1) world price tends to reduce and (2) impact of exchange rate policy of Vietnam. Businesses in exporting water rice become more and more difficult. Importers require higher and higher quality of rice products (such as rate of entire grain, perfume, taste...). 9, 2 According to Nguyen Ngoc Que research, Centre for information of Agriculture and Rural Development10

11 Competitive index measures price competitiveness through price, exchange rate and related policies.

So, coming with increasing rice quality, measures in promoting trade activities, improving post-harvest technologies need to be considered, in order to supply export information, widen potential market as well as push up competitiveness of Vietnamese rice in the world market.

5.3. The differentiation in cultivated fields and property among farmers

5.3.1. The differentiation in cultivated fields

In term of cultivated square, field accumulation tend to have increase in recent time. Number of farmers with 0.2-0.5 hectare scale of cultivated square had decreased gradually in period of 1994-2001 while ones with 1-3 hectares had raised rapidly, account for 2.54% of total, and farmers household do business without field land had raised in 3% of speed.

Due to field accumulation, there happens the state of increasing number of farmers do business without field land but occurs unequally among different rural areas. Particularly in South East area where industrial and services activities have developed quickly, the number of farmers without field land makes up 43% (according to consumers’ use survey in 2002 carried out by GSO of Vietnam). Others regions with high developing rate are Mekong River Delta and South Coastal Central.

Table 34.Rate of farmers do businesses without cultivated land (%)2002 1998 1993

Nationwide 19 9 8 1. Northern mountainous area 5 1 2 2. Red River Delta 14 3 3,2 3. Northern Central area 12 8 4 4. Southern Coastal Central area 20 2 11 5. Central Highland 4 3 4 6. South East area 43 24 21 7. Mekong River Delta 29 21 17

Source: Estimation of DTMSDC in 1993, 1998 and DTMSHGD in 2002, published by the World Bank in 2003.

5.3.2 Property differentiation

The situation happened similarly with the above mentioned, despite of the significant improvement in the work of poverty elimination nationwide. In 2002, West North areas and the Central Highland were accounted for the highest poverty rate of more than 50% while South East area ranges for the lowest rate of poverty. In addition, income gap between the rich and the poor as well as average income difference among areas have raised remarkably, particularly in such areas as Mekong River Delta, South East areas.

Table 35. Monthly income (1000 VND)

1996 1999 2001-2002 02/96Nationwide 226.7 295 356.8 1.57Urban 509.82 516.7 625.9 1.23Rural 187.89 225 274.9 1.46Northern mountainous area 173.76 210 232.55 1.34West north area 269.2East north area 195.9Red River Delta 223.3 280.3 35.3 1,58Northern Central area 174.05 212.4 235.5 1.35South coastal Central area 194.66 252.8 306 1.57Central Highland 265.6 344.7 239.7 0.90South east area 378.05 527.8 623 1.65Mekong River Delta 242,31 342,1 373,2 1,54

Source: GSO of Vietnam (2003)

The income differentiation reckons GINI index of consumption has increased with low level in compare with regional countries. The highest level of differentiation could be seen in areas of South East, Central Highland and Red River Delta whiles the lowest ones seen in Northern Central and Mekong River Delta areas.

Table 36. Differentiation in consumption reckon GINI index among different regions (%)

2002 1998 1993Nationwide 0.37 0.35 0.34Urban 0.35 0.34 0.35Rural 0.28 0.27 0.28Northern mountains 0.34 0.26 0.25North West 0.36 0.32 0.32North East 0.30 0.29 0.25Red River Delta 0.33 0.33 0.36North Central Coast 0.36 0.31 0.31South Central Coastal 0.38 0.36 0.36Central Highland 0.30 0.30 0.33

Source: Estimation of DTMSDC in 1993, 1998 and DTMSHGD in 2002, published by the World Bank in 2003 .

There still remain many difficulties in rural society. National average rate of less than 5 year of age is 4.2% while in the rural, especially in remote and poverty areas, this figure exceeds the level of 8-10%. The rate of children under 5 year of age affected by malnutrition is 33% nationwide, while in the rural this figure is of great higher. In addition, health care infrastructure in the rural is very poor because approximately 80% of State Budget for Health Care is distributed to big hospital in cities. In the period of transition to a market-oriented system, farmers have transferred their production from self-sufficiency to market oriented one. Level of commercialization in agricultural products has increased rapidly from 48% in 1993 to 70% in 2002. Mekong

River Delta and South East areas rank for the highest rate of commercialization level regions while the North mountainous area is of the lowest one with 525 in 2002.

Table 37. Rate of exchanged agricultural products among different areas (%)

Rate of products sold in markets (%)1993 1998 2002

Nationwide 48 59 70Northern mountainous area 36 44 52West north area 39 45 61East north area 37 44 63Red River Delta 39 55 73Northern Central area 77 78 74South coastal Central area 69 79 84Central Highland 85 74 59

Source: Calculation worked out by IFPRI and JBIC (2003), data supplied by GSO of Vietnam

The transfer of economic mechanism in the recent period has come with stable rate of urban unemployment. In years of 1998,1999 though the low rate of GDP (Gross Domestic Product), rate of unemployment raised a little, but in 2001, this rate tend to have decreased. Labor force in agricultural industry has more chance to join production process. However, this labor force seems not to manage to use full time in working, account for only 75% in 2002.

Table 38: Unemployment rate in the urban and rural areas, period of 1996-2002

Year Unemployment rate in the urban

Percentage of working time used in rural labor force

1996 5.88 72.281997 6.01 73.141998 6.85 71.131999 6.74 73.562000 6.42 74.192001 6.28 74.372002 6.01 75.41

Source: Statistic results on Labor force- Invalid and Social Affair, drawn out from Labor and Employment Survey carried out in 2001 and 2002.

VI. POTENTIAL AND CONSTRAINTS FOR FURTHER DIVERSIFICATION

1. Northern Mountain Region

1.1. Natural and Social-economic Conditions

1.1.1. Natural and Socio-economic Conditions of the Northwest

Natural ConditionsThe North West, a high mountainous region, consists of four provinces: Lai Chau (divided into Dien Bien and Lai Chau in the end of 2003), Hoa Binh, and Son La, stretching along the National Highway No 6. The region is still coping with a lot of traffic problems, especially in rainy seasons. Most of the land is covered with hills and mountains, so unused land area makes up 57,4% of natural land (2001), and the population density as well as ethnic minority groups has great influence on agriculture.Agricultural land accounts for 11.48% of natural land (figures in 2001), most of it is sloping land which creates difficulties in irrigation. The region has a low population density, only 66.76 prs/sqkm on average; besides, the population is unevenly distributed among the provinces and in different parts of each province.

Table 39: Area of land and density of population about region in 2001 Natural area (1000 ha) 3563.7Agricultural area (1000 ha) 409.2 Forest area (1000 ha) 1109.9 Industrial area (1000 ha) 59.4Habitation area 15.8 Total of population (1000 people) 2313.6 Density of population (1000/km2) 66.76

Source: GSO of Vietnam (2001)

Socio-economic ConditionsDuring 1995-2001, the annual population growth rate had remained 1.89%. This has been an obstacle in economic development at present and in the future for this mountainous region.There is a trend of expanding agricultural land area, especially the area growing perennial trees and forestry land, due to breaking fallow land and the policy of settling agriculture and the policy of allotting forestry land to farmers.

According to the GSO 2001, the GDP growth rate in 1996-2000 of the Northwest was 5.39%, lower than the national average (6.37%), based on the comparative price in 1994. The region’s income was mainly from agriculture, forestry and fishery, accounted for 68% of the total income of the region and the diversification in production is still restricted, especially in ethnic minority groups.

Table 40: Income and spending per capita, 1000 VND/year at current price1991 1995 2000

Vietnam 1268.85 2898.30 5087.88Northwest 600.83 1460.43 2126.42Source: GSO of Vietnam in 2001

The people’s income has been remarkably improved, according to the GSO (2001), GDP per capita in 2000 is 1.4 times higher than that in 1995. However, it is still lower than the national average, the income per capita of region is only 41.8 % of national average. This is really a big hindrance to the reinvestigation into production for economic improvement.In the same situation of the nation, in the past five years, there has been a movement in the ratio of the economic branches in the region with an increase in industry and service and a decrease in farming (agriculture, forestry and fishery). The decrease rate of farming production is 1.98% in 1996-2000; the ratio of farming production value makes up 23.92% of the region’s economy.

1.1.2. Natural and Socio-economic Conditions in the Northeast

Natural ConditionsThe mountainous North East, starting in the north at 20040’ with its southernmost tip lying at 23030’, and stretching from103030’to 108025 (West to East), consists of eleven provinces with an area of 6.5 million ha. The region shares the same border with China of 2000km in the north; in the east is Quang Ninh, near the North Gulf with 250 km of sea border with spectacular scenery.The geography of the land is quite complex and diversified with the absolute height of 2500m, 80% of the land is covered by hills and mountains with high chains of mountains and some mountains peak at over 2000m.The land is divided into smaller geographical regions, each has different characteristics of height and climate.The region has a tropical climate with cold and dry winters and hot and wet summers. In summer the temperature fluctuates from 28-300 C, and the hottest period is from May to June with the humidity of 80%. In winter the average temperature can drop to 3-50C as most of the area are high mountains and there is often hoarfrost on limestone mountains. Summer is also rainy season. The annual average rainfall is from 1700-2200mm. Because of the complex geography and high rainfall, typhoons and floods often threat the region.These mountainous provinces share the same feature, that is they all have vast area of natural land (6.5ha, 5937 m2 /person), the average population density is 137 prs/sqkm. Among those provinces, Bac Giang and Phu Tho have the highest population density of 360 prs/sqkm. Ha Giang is the province, which has the lowest population density. Besides, the population density of Ha Giang, Cao Bang and Lao Cai attains just the number of 70 prs/sqkm. 895,524 ha of the region is agricultural land, accounted for 13,72% of natural land area; 2,674,008ha is forestry land (41%); 2,696,893ha is unused land (41.3%, a big number), and the rest is land area for accommodation and for special

use, accounted for 1.3%. The vast area of land and low population density provide a favorable condition for developing the economy, especially to promote forestry economy and ecological tourism.

Socio-economic ConditionsAccording to the GSO (2001), in the years of economic reforms from 1991-2000, the GDP growth rate of the region stands at 6.2-6.7% (4.5% for agriculture, 9.2% for industry and construction, and 8.1% for service), lower than the national average. According to the GSO in 2002, the population of the region is 9,136,800 people (including 43 different ethnic minority groups). More than 85.11% of the population lives in the countryside and 81.37% of labor in region work in agriculture; Out of all, the people working in agriculture is 7,438,500, accounted for 81.41% of the region’s total population. The average population growth rate was 1.6 %. The abundance in the labor is a favorable condition for economic development, especially for agricultural development. Yet, in general, only a small percentage of the labor is trained (under 10 %).

1.2. Current Farming Systems and Diversification1.2.1. Current Farming System in the Northwest

General SituationAgriculture, forestry and fishery still makes up a big ratio in the region’s GDP and agriculture has the greatest influence on the development of all branches. The production value of this branch accounts for 74.51% of the total agriculture, forestry and fishery production value. This shows that farmers focus mostly on developing agriculture, less on forestry and fishery (which plays a small part in farming structure). Moreover, the production value ratio of agriculture and forestry is increasing and fishery is decreasing with the average decrease rate of –10.47% within five years 1996-2000.Basically, although aquaculture has a high decrease rate in ratio, this does not have any effect on the stability of the two other branches for it only makes up small part in the whole farming structure.The analytic results by the Agrarian Systems Department – Vietnam Agricultural Science Institute (VASI) demonstrates that the diversification coefficient of the farming systems in the Northwest is rather high in comparison with the rest of the country, the average coefficient of the region was 0.91 (in 2000) and the national average was 0.84%. However, the average decrease rate of diversification coefficient is now higher than the national average (- 0.51%). It can be seen that the diversification in the farming systems has been decreased or the specialization and non-agricultural activities have developed.

Agricultural ProductionIn the last period, agricultural production in the region has rapidly developed; however, its smaller branches have unevenly developed. Together with the fast development in cultivating and breeding, was the slowdown of agricultural service in the end of the 1990s of the XX century. The agricultural service has been expanded since 2002 thanks

to the development of private service. In spite of that, its ratio in agricultural production remains very low.The structure of agriculture in the Northwest has changed in the trend of increasing cultivating ratio, remaining breeding ratio and decreasing service ratio. The growth rate of cultivating is 1.39% meanwhile that of agricultural service is –52.27%.

There have been different changes in the agricultural structure in each province. Son La is the province with the high growth rate of cultivating, Lai Chau and Hoa Binh have high growth rate of breeding. Yet, there has been a decrease in agricultural service in these three provinces. There have been big changes in the structure of agriculture in these provinces: an increase in breeding in Hoa Binh, an increase in cultivating in Son La. In our opinion, the decrease in breeding ratio in Son La is due to the rapid increase in cultivating ratio (especially such trees as corn, sugarcane, tea and fruit trees which have strong relations with the market).

Cultivating ProductionIn cultivating production, fruit tree growing has attained the highest development rate (30.35%) while industrial perennial tree growing meets the dramatic decrease rate of –23.55%. The movement in production value can be seen as followed:- In Lai Chau, food growing has been expanded; vegetables, fruit trees and industrial

perennial trees have been grown less.- In Son La, annual industrial tree, fruit tree and food growing have been expanded;

vegetables and industrial perennial trees have been grown less.- In Hoa Binh, annual industrial tree growing and fruit tree growing has been strongly

developed; there has been decease in the number of vegetables, perennial and other trees.

Breeding productionWith an advantage of being a mountainous area, the Northwest has been focusing on the expansion of cattle breeding whose average growth rate of production value arrives at 10.72%, poultry breeding has lower growth rate (3.39%) and other kinds of breeding activity have all decreased in production value.In the structure of production value, cattle breeding makes up the greatest ratio (66.84%), poultry breeding and other kinds are 16.75% and 16.41%, respectively. There has been an increase in the ratio of production value in cattle raising with the rate of 4.21% whereas other forms of breeding have experience a decrease with the rate of –2.68% and –13.62%, respectively.

1.2.2. Current Farming Systems in the Northeast

General SituationThe ratio of farming production accounts for a high percentage in the region’s GDP, among all the branches, agriculture has the greatest influence on the growth of the whole. Its production values makes up 80% of the total agriculture, forestry and fishery production value. This illustrates that farmers live mainly on cultivating and breeding cattle and poultry. Provinces with high agricultural ratios (GSO in 2002) are: Thai

Nguyen (92.76%), Bac Giang (92.14%), Phu Tho (86.43%), Ha Giang and Cao Bang (79%).

Agricultural Production SituationFrom 1996 to 2002, there were big changes in the structure of agriculture, cultivating was on the way to decrease whereas breeding was on the way to increase; however, cultivating still took a higher ratio. In 2002, the production value of cultivating brought about VND 6.217.27 million, accounted for 62,25% of agricultural production value. The state’s agricultural service has been gradually vanishing and replaced with private service. The ratio of cultivating production in a province’s agricultural structure has a strong relationship with the growth rate of agricultural production.

Cultivating productionAccording to GSO in 2001, food growing still remains a high percentage in production value of cultivation, accounted for 62.7% (in 2000), higher than the national average (60.7%). Fruit tree group makes up 13.18%, ranking the second and having a trend of increasing meanwhile this tree group is decreasing in number throughout the country. Vegetables take up 10.83%, industrial perennial trees 4.41%, annual industrial trees 8.17% and others 0.68%.In most of the provinces, food growing makes up not only a high ratio but also has a high growth rate 14%-20%: Lao Cai (19.91%), Ha Giang (17.05%), and Bac Kan (13.11%). Some provinces have low growth rate of food growing such as Bac Giang (1.01%), Quang ninh (6.83%), Thai Nguyen (5.29%) and Lang Son (5.31%). Vegetables are grown mostly in Quang Ninh (19.54%), Bac Giang (17.51%), Ha Giang (12.01%) and Lang Son (96.26%). In Bac Kan, vegetables, perennial trees fruit trees and others particularly have a high decrease rate. Perennial trees are grown mostly in Yen Bai with the percentage of 19.35%, Thai Nguyen 20.16%; these two provinces have strongly developed tea cultivation in vast areas. In other provinces, this group of trees is in the trend of decreasing dramatically.

Breeding Production In the Northeast, breeding is a branch of agriculture that has a high ratio in agriculture as well as in the region’s economy. In the recent years, breeding has accounted for 20% of agriculture GDP and made up 7% of the region’s GDP.According to the GSO (2001), the Northeast has a variety of species of animal domestic population. Up to 1/10/2000, there are 3509 thousand pigs raised in this region (17.38% of the nation’s pig herd), 1252 thousand buffaloes (43.24 % of national herd), 507 thousand bovine (12.29% the nation’s herb), and 31,9 million domestic poultry (16.28% of the nation), mainly chicken . Apart from those animal specie mentioned above, horses and goats are mainly raised in the mountainous area. The drove of horses consists of about 100 thousand horses raised mostly in Ha Giang and Lao Cai. About 200-230 thousand goats are raised (mainly in Ha Giang).

1.3. Market Opportunities

Underdeveloped MarketIn the mountainous northern region, there is segmentation of market between provinces in the region and between this regions with other regions in the country. The Northwest and the mountainous northeast markets are underdeveloped and hardly have trade relations with the lowland provinces and with the northeast provinces contiguous with the Red River Delta. The provinces in the region just have small isolated local market channels, each of which may be connected with the market channels in The Red River Delta and rarely has interconnection. Apart from some market channels connected with some lowland markets for such products as fruits, maize, cattle and tea, other products do not have a large market.

Incertitude of Market Only some products with large quantity such as maize can be under favorable conditions in trading such as collecting, transporting to the lowland area. However, in the future maize production may have to compete with imported products.Fruits, which are seasonal, are often sold when fresh and rarely processed, so the market for fruits is really unstable. Because the traffic is not very good and transport charge is high, many products of the region is low competitive in domestic and foreign markets.Some products of industrial trees such as tea are traded both in domestic and foreign markets but exported products do not have firm position in foreign markets because of bad management in the production process that leads to products of low quality and low safety. In addition, there has not been a strong combination between tea growers and processing factories, import-export companies; thus, there remains instability in the production of tea and coffee.Products supplied mainly from extensive breeding production do not have stability in quality and high safety, so they cannot have good market channels in domestic markets and in exporting.Processing industry operates merely in industrial tree production. Processing factories are not built for others products, which are dispersedly grown and are not located in large areas. Because of this, there is a high risk in cultivating products that are sold fresh and many of them fall into overproduction situation as bananas, litchi, longan, apricot...

High transaction CostDispersed production, irregularity of quality, quantity and bad traffic are the causes of increasing transaction cost of all trades in the region. In many localities, goods cannot be sold due to bad infrastructure and the absence of markets. Underdeveloped Market ChannelsIn the Northeast, especially in mountainous areas, most of the market channels are underdeveloped. Trading activities focus on some products and periods that have high prices differential between one region and the others. The service system that is supported by the government is not dynamic and often disguised by private ones. The state’s service system, therefore, is hardly useful and private sectors and organizations are seen to operate without state’s preferences.

Market Opportunities

Production in Northern provinces contiguous with China, coastal provinces and hilly terrace areas contiguous with the Red River plain where the intellectual standards of the people are high can be expanded in order to develop markets in China. Up to present, there have been many products exported to China; however, not many provinces pay attention to this market.

1.4. Diversification feasibility

Natural conditionsDespite difficulties in natural conditions, the locals can develop special products relating with characteristics region. This region is the gateway to China, so products can be sold there, especially when the ASEAN – China Free Trading Agreement has been approved.

Socio-economic SituationMany provinces in this region have received allowance from the state and other countries through development project. This is an opportunity for development the diversification production. Infrastructure systems are more and more upgraded and developed, this helps to make trading easier. It is necessary to management and establish production zones along with develop infrastructure for bettering service system. It is also necessary to attract investment from the state, foreign countries and encourage investment from other regions so as to develop market channels, processing industry and training the labor.

Market ConditionsThe two big markets for this region are the Red River Delta and China. It is possibility to exploit the potential of specific products of this region is quite distinct from those in the lowland area. Products of good quality can be exported to the South or to Asian countries.

Capacity of management system and of laborIn order to diversify the range of products in the region, it is essential to better administrative ability of the local staff and to qualify the labor. Many localities have not made the best of the state’s priority policies for this region, and there has been a loss in investment and construction capital. In addition, because of the racial complexity, laws are not followed as strictly as in the lowland areas.

1.5. Constraints

Racial BackgroundIn the northern mountainous area, there are many ethnic minority groups, which have different levels of socio-economic development. Thus, for agriculture and rural development in these areas cannot be separated from dealing with racial issues and cultural traditions. Today, projects for agriculture and rural development often draw attention to technologies and neglect socio-economic issues. On the contrary, sociologists often focus on social issues and do not pay attention to rural agricultural development.

Natural conditions

Because this is the largest area in our country with a poor infrastructure and the geography is complex and full of obstacles, so socio-economic developing requires a big amount of money for investigating and constructing. A unique development strategy for all provinces in the northern mountainous area should not be done because the sub ecological areas have different natural and social characteristics. If we only take interest in profit from agricultural production, it can be seen that it is difficult to developing agricultural production. But we think that the agriculture and rural development in this region can produce the advantage about ecological, social condition for other region as Red River Delta. In deed, developing agricultural production of the mountainous northern region must be carried out in accordance with the nation’s political economic development strategies.

EducationThe education in this region is very diversity. In some remote areas, the literacy rate is very low and people do not have much chance to get access to information. Therefore, when carrying out rural agricultural development projects it is necessary be aware of the importance of the community and approaching methods must be delicate and flexible. Approaching methods in other regions can be applied difficulty in this region; even one method can be successful in one province but can not be successful in other parts of region, for example the differences between coastal regions in the northeast and the mountainous areas contiguous with China.

InfrastructurePoor infrastructure is one of the obstacles in the implementation of agricultural diversification as it leads to difficulties in approaching markets and technological information. It also leads to difficulties in finding markets and leads to low competitiveness of the products, which increases the risk in production.

Ecological RiskThe northern mountainous area plays an important role in preserving the ecological system for the whole Red River Delta. Thus, in diversifying agricultural system, other regions’ benefits should be taken into consideration. At present, the diversification in agriculture is bearing risk in the region’s ecological system and also the Red River Delta’s

MarketsMarket underdevelopment creates problems in agricultural diversification and brings about high risk in expanding commodity trees. Unprofessional market agents in small scales and unstable market channels also hinder the diversification process.

1.6. Prospects for Further Diversification

This region has the advantage in raising cattle. This should be promoted, especially raising cattle for meet because the process is easier than dairy production. Provinces in the region have not paid close attention to this.

Projects for expanding cultivation of fruit tree hills are very feasible in this region; however, actually the projects for fruit tree development focus only in production and there have not been management all commodity chain (production, processing and distribution). According to us, we can develop any projects for growing trees alternately (some kind of tree can be plant at the same time in one area). If this can be done, we can avoid the fact that when market prices drop sharply, growers hardly have any benefit and they cannot do anything but fell down what they have grown. Therefore, farmers should alternate tree varieties in orchards consistent with regional conditions.

Few processing factories are built to serve the expansion of industrial and fruit trees, mainly for exportation. Most of the factories are state-own, which are not self-motivated, and the investors pay most of their attention to the amount of money supported by the government, not to the operation of the factory later. There should be preferential loaning treatment to private sectors for setting up small processing factory. This would be suitable to the production scale and would help to resolve difficulties in collecting products.

We should make full advantage of the diversified mountainous ecology by producing products which characterize the region such as plum, peach, tea, cattle for meat, traditional fowls and pigs. Actually many development project have utilized technologies such as raising lean pigs or raising chicken with industrial technology are brought from the lowland deltas for this reason they have been proved to fail to develop both in production and trading.

2. Central Highlands

2.1. Natural and Economic Conditions

General Natural and Economic Conditions

The Central Highland, consisting of four provinces: Kon Tum, Gia Lai, Dak Lak and Lam Dong, contiguous with Quang Nam in the north, with Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Ninh Thuan in the east, with Binh Thuan, Dong Nai, Song Be in the south and sharing 500 km border with Laos and Cambodia, is a determining position in the nation’s economy, security and defense.

The Central Highland, which is rich in natural resources, is endowed with a vast fertile farming land area and natural varieties with many ecological zones that are suitable for growing high-valued industrial trees. Lying at the upstream of many big rivers, the Central Highland forest with a vast area plays an important role in preserving natural resources, especially land resources, water resources and biological varieties.

This region has a tropical monsoon climate with highland characteristics. There are two distinct seasons in the year: rainy season from May to October with heavy and centered rain. This season brings about favorable condition for agricultural production. The dry season lasts from November to April. During dry season, the rainfall is very low and in

some months there is hardly any rain. Drought has direct effect on life and production, especially where lack of the irrigational system. There are many difficulties in agricultural production during dry season.

According to GSO 2001, the total natural land area of the Central Highland is 5447.5 thousand ha, accounted for 17.5% of the nation’s land area. With a vast land area and abundant natural resources, the region has potentiality in developing agriculture, especially in growing industrial trees. Among 1258.8 thousand ha of agricultural land area, accounted for 22.6% of the nation’s agricultural land area, 666141 ha is used for growing perennial trees, 494142 ha for coffee, 97.2 thousand ha for rubber, 22.3 thousand ha for tea, 23.5 thousand ha for cashew and the rest for fruit trees.

The Highland has the population of 4.4 million people (in 2002), accounted for 5.3% of the nation’s population and the population of the rural areas makes up 97.2% of the total. There are more than 40 ethnic minority groups, of which Ba Na, Ede, K’Ho are bigger groups than the others.

Socio-economics Changes in the Recent Time

The Central Highland has made a great advance recently. The GDP growth rate (1996-2002) attains 13.83%, accounted for 1.69 times of the nation’s; in 2002, the total GDP of the region is 2.18 times of the total GDP in 1996. The total export value increases rapidly from $124 million (in 1990) to 376 million (in 2000), and income per capita increases 2.5 times; poverty rate decreases from 50% (1990) by 17% (2000). The people’s life standards have considerably improved.

From 1990 to 2002, the Highland’s economy has made great progress. However, the changing in ratio of economic branches was slow and unstable. Agricultural GDP ratio of the region or of individual provinces has decreased significantly in comparison with industry and service; the agricultural ratio drops from 67.66% by 50.18% in 2002. The ratio of service value in GDP remains high but grows slowly, and even levels up during some year before 2000.

2.2. Current Farming Systems and Diversification

Current Farming Systems in the Central Highlands

In terms of the total structure of farming production value, it can be seen that in 2002, the region’s agriculture makes up the biggest ratio of 96.19%. Fishery production value grows with a small percentage and even trivial (0.56%). There is the same trend in all provinces. Kon Tum has the highest ratio of forestry production value, four times higher than the region’s. This is a matter of fact because the Highland’s geography an climate are not suitable for the expansion of fishery; forests and industrial trees are the strong points of this region.

Table 41. Structure of farming production in 2001, unit: %

Province Agriculture Forestry FisheryCentral Highlands 96.19 3.25 0.56Kon Tum 86.46 12.41 1.13Gia Lai 95.40 4.53 0.07Dak Lak 96.77 2.56 0.68L©m §ång 97.25 2.15 0.60Source: GSO of VietnamTable 42: Coefficient of diversification12 in farming production (1996-2002)

Average of Coefficient diversification

Speed of variation in coefficient diversification

Cultivating Agriculture Farming production

Cultivating Agriculture Farming production

Vietnam 0,58 0,71 0,80 0,89 0,77 0,64Central Highlands 0,46 0,56 0,60 -6,02 -5,89 -5,57Kon Tum

0,61 0,72 0,78 -1,25 -2,49 -1,77Gia Lai

0,50 0,59 0,63 -3,77 -4,64 -4,48Dak Lak

0,45 0,54 0,58 -7,91 -7,19 -6,85Lamdong

0,41 0,51 0,55 -6,01 -5,34 -4,98Source : Dao The Anh, 2002

The table analysis results show that the Highland’s diversification coefficient of farming is lower than the national average: 0.60% in comparison with 0.80% (1996-2000). On the other hand, the coefficient decreases with the rate of -5.57 while the nation’s coefficient is 0.77% in 1996-2002. This shows that the diversification in farming production has decreased or the specialization process or non-agricultural activities have developed.

There are a variety of coefficients of farming diversification; Kon Tum has the highest coefficient (0.78%), and Lam Dong has the lowest of 0.55.

The farming diversification coefficient has decreased in all provinces, especially Dak Lak with the coefficient of –6.85%. Kon Tum has the lowest decrease rate (-1.77%).

Agricultural Development in the recent time

The ratio of cultivating in total agricultural products is high (over 80%). It has been in the trend of increasing year by year (77.66% in 1996 and 90.80% in 2002). On the contrary, breeding and service has been gradually decreased, especially breeding production with a sharp decrease (from 19% in 1996 to 7.64% in 2002). Service accounts for only a small percentage in the total farming structure of the region, and it makes up just 1.565 in 2002. It is clear cultivating plays a most important part in agricultural development in this region, which is on the way to specialize in production zones.

12

Cultivating is more and more important and nearly becoming the uttermost important element in agriculture. Meanwhile, breeding and service is becoming smaller and smaller.

The average growth rate of agriculture in 1996-2002 is 18.31%, of which the growth rate of cultivating is 21.44%. On the contrary, cultivating and service have very low growth rates (1.63% and 4.245, respectively). There have been an increase in breeding production in most of the provinces, but it is not remarkable: Kon Tum 1.91%, Gia Lai 2.685, Dak Lak 1.00%, and Lam Dong 1.98%.

Table 43: Growth rate of agriculture in 1996 - 2002, unit :% Agriculture Cultivating Livestock Agricultural

serviceCentral Highlands 18.31 21.44 1.63 4.24Kon Tum 13.26 18.86 1.91 -8.75Gia Lai 18.45 21.97 2.68 -25.95Dak Lak 21.39 24.38 1.00 23.64Lamdong 12.88 15.26 1.98 -2.71

Source: Agrarian System Department, VASI 2003.

Developing and Diversifying Cultivation

As mentioned above, cultivating plays an uttermost important role in the Highland’s agricultural expansion. The system of cultivating is rather diversified with the average growth rate of 21.44%. Provinces in the region are in the same trend with a comparatively uniform development rate.

Table 44: Growth rate of cultivating in 1996 - 2002, unit: %

 Agriculture Cereal

cultureVegetable and legume

Industrial annual culture

Industrial perennial culture

Fruit tree

Central Highlands 21.44 -5.16 16.62 -0.64 79.47 -15.78Kon Tum 18.86 1.62 10.46 14.66 61.73 -4.26Gia Lai 21.97 3.77 13.14 6.37 77.42 -25.69Dak Lak 24.38 -2.34 7.26 -0.58 83.55 -9.95Lamdong 15.26 -21.80 27.17 -10.85 75.00 -27.44Source: Agrarian System Department, VASI 2003.Developing and Diversifying Breeding

Table 45: Animal population in 2001, unit: 1000 headBuffalo Beefs Pig

Central Highlands 61.6 439.4 1111.7

Kon Tum 11.6 61.7 125.1

Gia Lai 14.7 248.4 280.2

Daclac 21.1 87.8 507.8

Lamdong 14.2 41.5 198.6

Source: GSO of Vietnam 2002

Developing and Diversifying Agricultural Service

Table 46: Value of agriculture service, unit: million VND1996 1997 1998 1999 2000 2001 2002

Central Highlands 140036 90663 173078 118046 59905 108913 237991Kon Tum 53577 46938 72003 4522 5197 13947 30935Gia Lai 41188 34459 60108 5572 8162 2683 6790Daclac 45271 9266 40967 107952 46546 81389 161739Lamdong 45437 44380 110747 5206 6925 10894 38527

Source: GSO of Vietnam 2003Agricultural Service makes up a very small part in the whole structure of agricultural production and has developed slowly. Main types of service are irrigational service, material and fertilizer supply, collecting and consuming agricultural products…and services through operation of farms such as: encouraging agricultural expansion and agriculture farm.

Developing and Diversifying Fishery

This region’s geographical conditions are not suitable for developing fishery, so the ratio of fishery in the structure of agricultural production accounts for a very small percentage (under 1%, according to the GSO in 2002. However, in the past few years, the growth rate of fishery in this region has grown rather high, 6.01% in the whole region (1995-2001), Kon Tum has the highest rate of 29.88% and Lam Dong decreased by –4.32%.

Developing and Preserving ForestsIn the recent years, there has been significant changing in the forestry system of the region from exploiting forests to replanting and preserving with the implementation of localizing for forest expansion, granting contracts to farmers in forest preserving and expansion, combining exploiting and processing, preserving and replanting. Hence, there have been improvements in economic effectiveness.

Expansion of Farms

Thanks to the state’s policies, there has been a remarkable increase in the number of big farms with multi-forms in all provinces in the region. Tay Nguyen, where the fishing ground is suitable for cultivating, breeding and aquiculture production, the number of farms has grown very fast.

Up to 2002, Tay Nguyen has had 6223 farms (according to the definition of the circular 69/BNN-TCTK on 23/06/2000), accounts for 10.07% of the number of farms in our country. Among those, there are 5325 farms for growing perennial trees, accounted for 32.55% of the state’s perennial tree growing farms. In spite of the small scale, the working force, invested capital, land area and fishing ground of the farms are much bigger than those of farmer families. In this region the average amount of capital for production of each farm is VND191.7 million. There are many perennial tree growing farms in this region. The average annual income of a farm is estimated VND 23.7 million, lower than other regions, because of the drop in prices of coffee and cashew. The reasons for low income lies in the fact that, some forestry farms and perennial growing tree farms are far from the crop time.

2.3. Market Opportunities

According to the statistic figures in the table, it can be seen that, most of the provinces have export value higher than import value. Dak Lak and Lam Dong are the two provinces, which have the highest export values. Export values have increased in all provinces (if we make a comparison between the figures in 1995 and 2000); however, each year, there are big changes in export value of each province.

Table 47: value of import and export, unit :1000 USD1995 1998 1999 2000Export Import Export Import Export Import Export Import

Kon Tum 2917 1270 2314 6017 2391 1348 4586 1817Gia Lai 10766 3073 56240 10222 69352 7515 63907 22020Daclac 185137 29401 264570 14174 275000 13226 240000 10887Lamdong 7347 1981 35745 9347 30763 9900 28556 9641Source: GSO of Vietnam 2002

The roots of changes in direct import and export activities lies in the decrease in prices of coffee (the main exported good in the region) and some agricultural products in 1999-2000. This leads to the decrease in export value. Dak Lak, which has the largest land area for growing coffee, has experienced the sharpest decrease rate in export value from 39.4% (1999) to 12.7% (2000). The rates of increasing import value in each region are different, for example, Gia Lai has the highest import value increase rate (193.01% in 2000) while Dak Lak has the decrease rate of 17.68%.

The key export goods in the Highland such as coffee or rubber depend a lot on the world market. At present, they are still exported as raw products. Thus, there is a high risk in the integration process. Experiences from other countries show that if we do not diversify processed products, have our own trade names and do not reorganize production

branches; there will be no actual benefit from exporting raw products. Because of separated specialization process, and little corporation in sharing the risk between braches, the production of industrial trees for export cannot resist the risk from nonstop changes in the world markets.

Tea and sugarcane producing in the Highland is also facing big challenges in competing on production price and quantity in the integration time. In particular, sugarcane growing and sugarcane production in the region are under the pressure of survival when the tariff barriers of the domestic markets are annulled.

In terms of maize products, Tay Nguyen is a big maize producer in our country, in the past ten years; domestic maize market has developed rapidly due to the demand for maize in breeding. However, domestic maize products are competed by imported maize products, especially products from America when the tariff barriers are annulled. Thus, maize producers in the region must have careful consideration to this.

One of the new products of Lam Dong is green vegetable with the increasing productivity in these years. The main reason for that is the vegetable market is more and more expanded. Vegetables grown in Lam Dong are sold in many big cities and even in the North. With the strong points of quality and harvesting, vegetables may be the new strength of developing agriculture in this region.

2.4. Diversification Feasibility

Natural conditions

The Central Highland has favorable condition for growing many kinds of trees that are of demand in the market. With the advantage of fertile soil, this region can expand cultivating of vegetables, beans, cotton or raising cows for meat and milk…

Socio-economic ConditionsThe region’s infrastructure is more and more upgraded, especially when Ho Chi Minh Route is completed. The Vietnam Communist Party and government have promulgated ethnic policies in the Highland. In the region, there are many big downtowns, which are developing and may be centers for transferring science and technologies. The region’s labor is very cheap which provides good conditions for enterprises of medium and small size.

PoliciesThe party and government are promoting transferring science and technologies into the Highland through programs for developing key economic sectors. It would be possible to establish big agro-industrial processing zones which are closed from producing, processing and delivering. To perform this, there should be preferential policies for development to enhance agricultural diversification together with expanding enterprises of small and medium size and private actors. The government is offering preferential investment into improving economy, education and heath care in this region.

MarketsThe Highland’s products have their domestic and export market and have there own positions in the market. Other products such as untimely vegetables, maize, soybeans and cotton…are of demand in domestic markets. Domestic markets for meat and milk are developing rapidly. This enables breeding production in the region. In addition, China’s southern market is very big promising a good market for the Highland’s products. The thing is how we can find the good way to produce and get access to domestic and foreign markets.

2.5. Constraints

The Central Highland, though rich in natural resources, still has some following constraints:

Racial complexity: Inherent from historical characteristics, there are different ethnic minority groups in this region; each of them has a distinct cultural background. There are different understandings about land ownership and some of those are beyond the laws. Because of this, if problems over the relationship among ethnic minority groups cannot be compromised, the Central Highland cannot have social stability and it will be very difficult for the region to develop stably.

Low education standards of the people: Tay Nguyen is one of the regions where the education standards of the people are low; there is limitation to transferring information, so there are difficulties in the implementation of the state’s regulation. The differences in cultural standards of the people are obstacles in carrying out economic development strategies. In order to develop the Highland’s economy, we should upgrade the intellectual premises, and encourage bringing information to the people.

Climate conditions: Because in the Highland there are two distinct seasons in the year, water conditions in the dry season are a disadvantage to the expansion of cultivating and breeding. Severe whether conditions in many parts of the region also hinder the development of production.

Poor infrastructure: Poor infrastructure leads to an increase of the input expense and commercializing expense.

Limitation in administrative ability of the local authorities: The administrative ability of the local leaders is not as good as that of developed regions in our country. The drawback lies in the state administration and in the development of rural agriculture in general.

Underdeveloped service system: Service system is not well developed in the region, which causes the decrease in product quality and production expense. Output services are well treated, especially product processing.

A lack of participation of the people and local organizations in establishing programs and projects for alleviating poverty: Most of the poverty alleviating programs are set up by the state from the centre to the locals. This makes the programs less feasible in reality.

Poor families have not seen to be the important and direct participants in rural agricultural development. The poverty alleviating programs focus only on investigating into poor regions, districts or communities, but little attention is paid to poor families.

Unreasonable investment: Most of the programs focus on improving infrastructure, and have paid much attention to investment into developing production to improve people’s income and life standards.

High risk in the specialization process: Most of the farmers who have favorable condition for growing coffee, grow nothing but this kind of tree and they have no other sources of income. When coffee price is high, they invest all their money and capital loaned from the bank to buy more land for growing coffee. When the price drops out, they cannot afford maintaining the growing area and then they get into debt. Many families do not breed any kinds of cattle or poultry and lack understandings of growing annual trees. Moreover, red soil bazan is suitable for perennial trees only, not suitable for annual trees or plants such as rice. These families become poor and have to work for other farmers with low-paid and short-term work.

Ecological risk: Expanding agriculture, especially developing cultivation means that exploiting natural resources such as land, water. The reasonable exploitation of natural resources must be properly taken consideration. If the development is not under the programming scheme or natural resources are overexploited, the ecological balance will be ruined which will lead to instability in agricultural development. Because of disorganized immigration, which cannot be under control, there has been deforestation for farming land in the Highland. This leads to the decrease in the area of natural forests and the exhaustion of water resources, which have severe influence on the environment, which in turn, have bad and long-lasting influence on agricultural development.

There should be much consideration to intensive farming technologies in the region. At present, one common phenomenon is that coffee growing fields are excessively exploited in order to bring about high productivity and quick benefits. The farmers do not pay attention to proper exploitation to maintain their coffee fields for long time. The life circle of coffee is not as long as before because people overuse chemical fertilizers and harvest in the wrong way. This way of cultivation is gradually spoiling coffee quality.

2.6. Prospect for Further Diversification

The Highland has great potentiality in diversifying agricultural production, based on focusing on new products that are associated closely with the region’s social and natural conditions. This diversification counts not only the market elements but also

the elements for the stability of society. It must also serve the people’s benefit by satisfying their need and helping them to compete in the market.

To put this strategy into practice, we should encourage establishing enterprises of small and medium size enabling them in production as well as in having trade names for their products. We should also develop the establishment and operation of organizations, associations and co-operatives of farmers and products to strengthen the position of the farmers and to create a strong combination between economic branches.

The diversification in production can be carried out in two directions as followed: Diversifying branches’ production: The diversification based on the specialization in production helps to avoid high risk of depending on one or two products. For those farmers who have small amounts of capital should follow the strategy of diversification to lower the risk of unexpected changes in the world market. In particular, the enforcement of service and processing industry will enable a more stable development of agriculture. On the other hand, the development of industry and service help to ensure modernizing rural agriculture, lowering agricultural ratio, creating jobs for people and ensure effective exploitation of natural resources. The Highland’s ratio of forestry products should be expanded on the basis effective exploitation and preservation of forest resources. Breeding is not developed, although this region has great potentiality in raising cattle. Breeding expansion will contribute to cultivating activities and to the balanced and stable development of the region. Developing breeding production must be in combination with processing industry for the Highland is far from big consuming centers in our country.

Promoting the diversification of products in one branch: By developing processing industry or varying kinds of growing trees, diversifying products in this way is called internal diversification by economists. The internal diversification guarantees the diversification of consuming markets and the decrease of risk in integration.

3. The Deltas

3.1. The Red River Delta

3.1.1. Natural and Social-economics conditions

The Red River Delta has the total natural land area of 14.79 thousand sqkm (accounted for 4.55 of the nation’s land area). The delta is consolidated by two big rivers, the Red River and the Thai Binh River; therefore, it is a fertile plain. Of the total natural land area, agricultural land area of the delta is 857.51 thousand ha, accounted for 57.89%, forestry land area is 119.10 thousand ha (8.05%), and unused land area is 178.15 thousand ha (12.04%).

In terms of climate and hydrography, the Red River Delta has tropical climate, which is strongly influenced by monsoon. The annual average temperature is about 23.40C, and

the average humidity is 84.5%. The annual average rainfall is comparatively high, about 1,802 mm a year. Undergone different development periods, up to now, the delta is the most populous region in our country. The region has the population of 17 million (in 2000), accounted for 22% of the country’s population.The average population density of the region is 1150 prs/sqkm, highest of eight regions in our country and 4.9 times higher than that of the national average (235 prs/sqkm). The region’s farming land area on average is 0.28 ha per household, only 0.34 time of the Mekong Delta’s average.

In terms of education levels and intellectual standards of the people, the Red River Delta is a region, which has high socio-economic standards in comparison with other economic regions in our country. According to the GSO, the number of secondary students in 1997-1998 is 1,63 times of that of the Mekong Delta and the number of high school students is two times. It is the same in professional training; the number of students in vocational training schools, colleges and universities is 3.62 times of that of the Mekong Delta1. On the other hand, according to the research by Vu Ngoc Tram (1997), 13.8% of the householders in this region have attained high school education ; 86.2% of the householders have attained primaryor secondary education. Therefore, people in the region have an ability to acquire technological advances and have quick understandings of the market.

In terms of economy, due to natural and socio-economic strengths, the Red River Delta, for a long time, has been one of the main economic regions, a big economic center of the country. According to our analysis results of the statistics in 2000, the total GDP of the delta in actual value is VND57.12 thousand million, accounted for 20.88% of the nation’s GDP. Considering economic growth rate in the recent years, the delta has the average GDP growth rate of 7% a year in five years (1996-2000), highest of four economic regions in the North.

3.1.2. Current Farming Systems and Diversifications

General Economic Situations

Table 48: Structure of GDP in Red River Delta (1996-2002), unit: %Agriculture- Forestry -

FisheryIndustry and construction

Service

Vietnam 24,95 34,26 40,81Red River Delta 21,83 31,32 46,96Hanoi 2,77 35,02 62,21Haiphong 14,50 31,84 53,66Hatay 36,19 32,00 31,81Haiduong 30,23 40,17 29,59Hungyen 42,41 26,89 30,70Ha Nam 37,80 26,68 35,52

Nam dinh 36,05 22,18 41,77Ninh Binh 43,89 23,96 32,15Vinhphuc 31,32 32,05 36,63Bac Ninh 34,98 33,10 34,51Thaibinh 49,20 15,10 35,71Source: Agrarian System Department of VASI

In the past few years, the ratio of agriculture has been decreasing in the economic structure. Farming growth rate is lowest with the average of 3.48% and it is gradually decreasing for some main reasons: the urbanization of cities, towns and some rural areas has changed some area of farming land into land for accommodation, land for industrial zones and land for road construction. Another reason is that more investment into industry, construction, commerce and service has increase value of these branches.Farming ratio is decreasing step by step in the whole economic structure. In 1996, this branch accounts for 21.7% of the total economic value of the region, in 2002, it accounts for just 22.42% (decreasing 2.59%). The region’s decrease rate of farming ratio is highest of eight economic regions in the country. Up to now, farming has still been the mainstay economic branch in many localities such as Thai Binh, Ninh Binh, Ha Nam, Nam Dinh. This can be seen through farming’s contribution to the locality’s total economic value and its employment of the working force as well as its supply of foodstuff for other localities.

Agricultural Production

Agriculture still has greatest influence on the development of farming production. Its production value makes up more than 90% of the total farming value, higher than the national average (80.91%) This shows that householders focus mainly on developing cultivating and breeding, and partly on aquaculture and capturing. Forestry plays a very small part in the region’s production structure. In 1996-2000, the ratio of production value of fishery has the trend of increasing, whereas, agriculture and forestry area in the trend of decreasing in farming structure.

Basically, the region’s forestry production has decreased in ratio of production value; however, this branch takes up a small percentage in the total farming production, so this decrease has little effect on the stability of the two other branches.

It can be seen from the analysis of the table that, the diversification coefficient of farming of the region is lower than that of the nation, 0.77 (in 1996-2000) compared with 0.84 (of the national average). However, the region’s decrease rate of the diversification coefficient is 0.34 whereas the national average rate is 0.02. This may show that the diversification farming production has decreased or there have been an increase in specialization or non-agricultural activities.

There are differences in diversification coefficients among provinces, of all Hanoi has the highest diversification coefficient (0.85); followed by Hai Phong (0.83), and Hung Yen

(0.80). In order to reckon the diversification coefficient, we deal with provinces, which have the same quantity of products. Thus, it can be seen from the diversification coefficients that the diversification of products in farming production is nearly alike. Some provinces that have high level of production specialization may have higher diversification coefficients than other provinces.

In five years 1996-2000, there are no considerable shift between cultivating and breeding., the production value ratio of agriculture changes very little. However, there has been a remarkable shift between breeding and cultivating in the Red River Delta. In 1996, breeding production makes up 16.43% of the total agricultural production value. Yet, in 2000, this number attains 25.57%. Breeding production develops most in provinces such as Ha Noi, Ha Tay, Hung Yen, Bac Ninh…with the expansion of production scale and the development of breeding specialization, especially pig raising. Thus, the structure of agriculture in the Red River Delta shifts in the trend of increasing breeding production ratio and decreasing cultivation and service ratios.

Cultivating

The structure of cultivation in the region is rather diversified. Most of tree varieties are grown in different areas of the region. With the average growth rate of 2.54%, the structure of cultivation is shifting in the following directions:

- Expanding the growing areas for vegetables of all kinds; vegetable growing has the growth rate of 14.95%, higher than the rates of growing other kinds of trees.- Food growing has a rather high growth rate of 6.45%.- Perennial industrial tree and annual tree growing has the average decrease rate of 59.18%.The reason for this shift is that that government encourage farmers to expand the area for growing winter trees and grow trees of high quality and productivity; and the government invest more into irrigation and transferring technological advances. However, the potentiality of land resources for growing industrial trees is limited and there are often dramatic changes in market of perennial trees. All these have forced the farmers to remove perennial trees with other kinds of trees that bring more benefit.

Breeding Production

Among the provinces in the Red River Delta, Ha Tay, Hung Yen and Bac Ninh have high ratio of pig raising with the breeding production ratio accounted for more than 72% of the total breeding production value.

Table 49: Structure of livestock production in RRD (1996-2002), unit %Pig production Poultry production Other animal

production1996 64.85 18.11 17.041997 58.12 15.41 26.471998 61.23 16.68 22.09

1999 63.79 14.92 21.282000 64.29 15.06 20.652001 64.23 15.10 20.672002 65.05 15..21 19.84Source: GSO of Vietnam 1996 - 2002

The number of cattle droves and poultry flocks has increased rapidly but at different speed among years, growing fastest if the number of pigs and then the number of domestic fowls. Nowadays, raising pigs is becoming a popular production activity in most households. The mode of production has the direct influence on the productivity of pig raising.

3.1.3 Market Opportunities

The Red River Delta’s products are not in traded specialization in export markets as the Central Highland or the Mekong delta. Most of the markets for this region’s products are domestic. The development of domestic markets in the past ten years is a driving force for the diversification of production. In recent time, there has been the segmentation in the domestic market due to the gap between the classes of the people. New requirements in quantity have put the region’s production at an advantage as well as a challenge.

The biggest market for agricultural products is the market for breeding products. The increasing demand for meat, eggs and milk is an opportunity to expand breeding production. Yet, there are more and more demanding requirements and these products are competed by imported products.

Markets for vegetables and winter crops are more and more developing. These markets and markets for breeding products are beginning to combine with other markets throughout the country. The increasing demand for these products in the region and in our country gives a great opportunity to expand markets for products from winter trees in the Red River Delta. Like breeding products, products from winter trees are facing the demanding requirements of the consumers on quality and safety of products,

Rice production is a key element in agricultural production in the Red River Delta. But there is seldom abundance in rice production and this product does not bearing as many commodity characteristics as breeding products and winter crops. Rice market has little influence on the people’s income because people rarely bring rice to the market. Because of the rapid growth of breeding production, the delta is a big consumer of maize, rice and manioc in the country.

3.1.4. Diversification Feasibility

Natural conditionsThere are a great variety of ecological and weather conditions. This is an ideal basis for the diversification of cultivating trees and plants. Apart from natural conditions, the well-constructed irrigational system is a good ground for diversifying production.

Social-economic conditionsThe Red River Delta, whish has a good infrastructure and where there are many institutes of science and technologies, is a center of socio-economic conditions for the diversification and the expansion of agriculture. Besides, rapid urbanization process should be put under careful consideration, as it may be an advantage or a disadvantage in developing the economy. The abundant working force is of great advantage to the development of economic sectors that require a small land area but a large workforce. Many industrial zones are being built in the region; this will enforce the combination between producing and processing.

Market ConditionsMarket channels in the Red River Delta are fairly developed with flexible market systems, which are able to combine demand and supply. Good infrastructure helps to reduce transactional charges of all producers. In the region, there are many big, medium and small consuming centers, which are different in demand for quality and supply. This is a favorable condition to develop the diversification of household economy. One weakness of agricultural production in approaching the market lies in the dispersed production, which often leads to high transactional charges and uneven quality. It is difficult for the region to export a product of large quantity, equitable quality and stable supply.

3.1.5. Constraints

High Population Density Population pressure is a problem, which needs to be solved. High population density, abundance in working force has been an obstacle in locating farming land, mechanizing and modernizing agriculture. The production scale of household is often small; this is also the main reason for the instability of supplying products in large quantity and equitable quality.Although the working force is abundant, the vocational training school and system operate ineffectively. As a result, the farmers, who are under great influence of traditional ways of producing, find themselves difficult to catch up with new requirements of the market on the specialization in technology, administration, and commerce…

Administrative management The renovation of the local administrative management has progressed slowly and has not caught up with issues on market, production controlling, training the farmers and associations of farmers. The local leader staff has not been trained thoroughly to adapt to new socio-economic situations. Many projects are subjectively worked out, not under careful evaluation or examination by a process of constructing science. Therefore, there are losses in carrying out projects. There is little chance for needy people to be supported by large-scaled development projects because these projects are mostly carried out in the mountainous areas and rarely in the Red River Delta. Approaches focus mainly on developing technologies, and have little concern for socio-economic issues and markets.

Environmental issuesBecause of the restriction of land area and a big population, the region’s production is always facing environmental obstacles. In diversifying production, all related issues should be counted to ensure the environmental balance for agricultural production, the quantity of products and the people’s living conditions.

MarketOne weakness of agriculture in the Red River Delta is dispersed production, which raises the transactional charges and uneven product quality. It is difficult for the region to export a product in large quantity and of quality of the same rank and regularity in supply.

Risk in ProductionIn the Red River Delta, many households implement specialization, but input and output service is not good, so there is high risk in the specializing production. Organizations and associations, which provide support in improving and controlling product quality, are not effective. This is another element that increases risk in production. If specialization is better implemented, it is more difficult to have control over epidemic diseases; the recent epidemic diseases in breeding and cultivating reveal the lack of control on a large scale of responsible bodies.

3.1.6. Prospects for Further Diversifications

Diversification through expanding winter cropsThe cultivation of winter crops is one strong point of the region in growing temperate vegetables. This advantage should be made the best because if the products have high quality, it will have large markets at home and abroad (in Asia). In recent time, the products from winter crops have had no neighbor competitor for In China it has been too cold to grow moderate vegetables.

Diversification through developing breeding productionDeveloping breeding production helps to increase diversity in the region’s income and increase stability of the region’s income. It is possible for the region to expanding different kinds of breeding products, which have high competitiveness because the region has the advantage in the working force.

Improving traditional productsThe Red River Delta has a long-standing traditional background. In the new situation, a new way for producing traditional products under their guaranteed trade names should be worked out. These products can help to preserving cultural values and have a unique competitiveness, so they will have great contribution to alleviating poverty. At present, the France is supporting the Ministry of Agriculture and Rural Development to develop production of these products as AOC, IGP.

Diversifying fruit trees

With the diversified ecologies, fruit trees, with the distinct characteristics of quality, are a strong point of the region’s production. Thus, growing fruit trees that bring the local characteristics is now a preferential direction; however, attention should be paid to processing and commercializing products.

Encouraging the establishment of self-control farmer organizationsIn order to develop the region’s production, the government should encourage and help to combine farmers into co-operatives (Vietnam Agricultural Science Institute has been successfully in studying and finding this model), or into associations so that they can be helped in producing, processing and having trade names for their products. On the other hand, establishing farmer organizations and associations contributes to co-operate the outputs of different branches to increase competitiveness in quality, price and supply.

Diversifying productsThere should be diversification in products of each branch to create strong internal diversification. This will satisfy the industrial demand of the market. There should be also diversification in producing products that are processed, examined quality, have trademarks and packed…

Diversifying agricultural serviceThe region’s input and output services need to be diversified and developed. We should have different forms of organizations and give priority to private sectors, farmer associations who give input and output service. Most of the service co-operatives are under control of the government. Those co-operatives are not active, so they need to be improved to serve the farmers’ benefit. In addition, farmers should be helped to set up their community service through combination in buying the input and selling the output.

3.2. The Mekong Delta

3.2.1. Natural and Socio-economic Conditions

General ConditionsThe Mekong Delta, a fertile plain consisting of twelve provinces (Long An, Dong Thap, An Giang, Tien Giang, Vinh Long, Tra Vinh, Ben Tre, Kien Giang, Can Tho, Soc Trang, Bac Lieu, Ca Mau), has the natural land area of approximately 4 million ha, accounted for 12% of the total national land area. The delta’s farming land area is 2.97 million ha, accounted for 75% of the region’s land area and accounted for 32% of the country’s farming land being used (9.3 million ha). The agricultural land area is three or four times larger than other deltas. The region has a rather low geography, only 4-5m above sea level.

The Mekong Delta has a interlacing network of waterways and canals which are evenly distributed over the region; on average in 100sqm of natural land area, there is 10sqm of water Area.

The region has a tropical monsoon climate, with a distinct rainy and dry season. It is hot all the year with the average +temperature of 27.50C. The rainy season is from May to November with the average rainfall accounted for 92% of the total annual rainfall. The Dry season is fro December to April with the average rainfall accounted for just 5-8% of the annual rainfall. The annual rainfall of the region is 1650mm, peaking at over 2500mmm. The annual humidity is high (80%). The Dry Monsoon often blows in dry seasons and the Southwestern Monsoon often blows in rainy seasons. In rainy season, there are often floods from August to November.

The region’s population in 2002 is 16,713.7 thousand people: The urban population is 3,088.5 thousand people accounted for 18.48% of the region’s population; the rural population is 13,625.2 thousand people, accounted for 81.52% of the region’s population. In 2001, the region’s population density is 416prs/sqkm, higher than the national average 9239 prs/sqkm). Provinces that have high population density are: 864 prs/sqkm), Vinh Long (690 prs/sqkm), Can Tho (615 prs/sqkm). The delta has an abundant working force, which is an advantage for economic development, especially for agricultural development. However, basically, only a small part of the working force is under training, under 10% on average. It is the insufficiency in work force training that results in low standards of working force and difficulties in acquiring scientific and technological advances. This should be taken into consideration while carrying out rural agricultural industrialization and modernization.

According to the GSO, in 2003, the total GDP of the region is VND 64,834.9 billion; increasing 9.57% compared with that in 2001. Income from farming production still makes up a big ratio (50.18%), mainly is rice cultivation and aquaculture. Agricultural GDP growth rate in 2002 is 7.67% of that in 2001; industry and construction 134.955, and service 9.96%.

People’s IncomeIt can be seen from the table that the income growth rates of the people is fairly high, with the average minimum of 7.5% and the average maximum of over 10% a year. The difference in these two groups is 6 times in1996, growing into 8 times in 1999 (in 2001-2002, the different level decreases by 7.1 times) , especially provinces such as Can Tho which has the growth rate of the lowest income group recorded 7.99% (in 1996-1999) and the growth rate of the highest income group is 22.11%; An Giang (5.09% and 21.71%, respectively) and Vinh Long (6.27% and 17.87%, respectively).

No land situation of farmers In the Mekong Delta, one unique reason for bigger gap between the rich and the poor is the lack of farming land or no land in some households. According to the GSO (in 20002), the percentage of households who do not have land for agricultural production is increasing. In1994, there were 12,250 households, and in 1997, the number increases to 136,338 households with the increasing rate of 123% a year. In 1994, the number of households who did not have farming land accounts for 0.7% of the region’s households; in 1997, the number increases to 5.965. Provinces, which have high ratio of households that do not have farming land are Tra Vinh (in 1994:770 households, 0.67%; in 1997:

16,198 households, 14%), Bac Lieu (in 1994; 489 households, 0.63%; in 1997:14,086 households,13,33%)…

3.2.2. Current Farming Systems and Diversification

General Farming SystemsThe Mekong Delta’s aquaculture makes up more than 60% of the nation’s total aquaculture value and is in the trend of increasing in production value. In 1996-2002, agricultural service value increases but not stable. Forestry has smaller production value than other branches and has low growth rate (increasing from over VND 700 billion to over VND 920 billion in 1996-2001).

Table 50: Structure of farming production in Region, unit: %

Total farming production in Region Agriculture Forestry Fishery

1996 40,42 38,48 12,98 61,39

1997 39,46 37,04 16,24 60,891998 40,36 38,30 16,23 59,581999 39,50 37,60 15,11 58,622000 39,09 36,24 14,96 60,332001 38,23 34,20 15,30 61,73

Source: GSO of Vietnam 2002

Agricultural ProductionTable 51: Structure of agricultural production in Region, unit: million VND, price 1994

Agricultural production Cultivating Livestock Agricultural service

1997 34.274.185 27.185.616 5.269.641 1.818.9281998 36.807.800 30.172.718 5.752.828 882.2541999 38.700.440 32.477.617 4.228.638 1.994.1852000 40.625.086 33.888.218 4.624.797 2.112.0712001 39.325.602 33.762.022 3.919.774 1.643.8062002 49.414.411 41.076.497 5.337.000 3.000.914

Source: GSO of Vietnam 2002

The agricultural structure of this region is different from the nation’s common structure. Whereas, the breeding production ratio is increasing, the region’s breeding production decreases from 15.97% by nearly 10.80% (1996-2002) (the Red River Delta’s increases from 16% to nearly 25%). In 1998-1999, the ratio of breeding production decreases rapidly, equal to the rapid increase in the ratio of cultivation.

Diversification Coefficient

According to Agrarian System Department of VASI in 1996-2002, the farming diversification coefficient fluctuates unstably and drops out in 1998-1999 when the coefficient of cultivation decreases remarkably (from 0.58 to 0.4). This period is also the time when cultivation production value grows up and becomes powerful (from nearly 85% to nearly 84%). The coefficients are calculated based on the statistics of the production value. Thus, the decrease in the diversification coefficients can be explained by two main reasons. The focus on developing some products brings about the increase in productivity and the output of production or the raise in prices also leads to the increase in production value. However, all prices in this calculation are actual fixed prices in 1999, so the increase in prices is excluded, and the reason of the increase in the production output is left. Based on preliminary analysis of statistics, we see that, the diversification coefficient of cultivation decreases because of the increase in production value of growing food, especially rice. This trend is analyzed more carefully in the next section.

Cultivating SystemsAmong three rice crops, the Spring-Winter crop is the main crop that provides products for export. The third crop is autumn-winter crop, which is grown mostly in Can Tho, Vinh Long, Tien Giang, Dong Thap, An Giang, Kien Giang. Since 1999, the third crop has been less growing and is gradually replaced fresh water aquaculture (raising shrimps). The growing land area of this crop decreases from 3500 ha in 1999 by 2500ha in 2001. In 2001, the rice growing land area reduces 200,000 ha compared with that in1999. The main reason for the decrease of rice growing land area is state’s policy in cutting down one rice crop for shrimp aquaculture, and the third crop is replaced by aquaculture. According to the decision 173/TTG of the Prime Minister, the target for rice output in the Mekong Delta in 2005 is 15.5-16 million tons. In 2001, the number of households working in aquaculture accounts for 7.5% of the farmer households (the number is over 2% in 19940. Among the provinces in the delta, Bac Lieu and Ca Mau have greatest movement in shifting into aquaculture. Those are two provinces that have high ratio of aquaculture in the farming structure.

Breeding Production SystemsAccording to GSO 2002, it can be seen that the region’s breeding production is decreasing in the production value. This branch’s income drops from VND5,300 billion to nearly VND4,000 billion in 1996-2001 (until 2002, the branch recovered itself as in 1996), especially cattle raising.

The number of buffaloes decreases from more than 250 thousand (in 1991) by 40.2 thousand (in 2001). This is possibly because of the mechanization in agriculture. Before 1995, the number of cows continually decreases, but in 1996-2001, the number increases year by year due to policies for expanding cow breeding for meat and for milk and encouraging self-sufficiency in demand for milk and meat in the localities. An Giang, Ben Tre and Tra Vinh are provinces which have developed cow raising, especially An Giang with advantage of two mountainous districts Tri Ton and Tinh Bien. Long An, Tien Giang, Can Tho, Vinh Long have favorable conditions for raising cows for milk. A Giang is chosen to be the province which has made progress in raising milk cows. In

2001, the province’s herd of milk cows is estimated to consist of about 1600 cows. In some regions thanks to the development of growing foetus, maize, cow raising is put at an advantage to develop.

Poultry is in the trend of increasing in number, but the number is unstable in 1990-2000, particularly the growth of ducks in Tien and Hau Rien. The Mekong Delta is the main area for raising ducks in our country.

Development of big farmAccording to the joint circular by the GSO (No69/BNN-TCTK on 23/06/200), the criteria of determining a farm in the Southern provinces are as followed:

Perennial tree farm: more than 5 haAnnual tree growing farm: more than 3 haForestry farm: over 10 haBreeding farm: big cattle 10-50, cattle 20-100, pig for meat 100, domestic fowls: 2000Aquatic farm: over 2 ha…

According to GSO in 2002, most of the farms are annual tree growing farms (rice in particular), and other kinds of farms account for a small percentage. Our most recent information, there is a trend of expanding aquatic farms in the Mekong Delta.

3.2.3. Market Opportunities

Rice MarketAccording to the Down Jones 2003, there is a new prediction of the Food Agriculture Organization (FAO), rice output in the world in 2003-2004 will increases 3.2% after the decrease of 4% in the last crop. Rice output in 2003-2004 crops is predicted to increase in Thailand, Bangladesh, Philippine, increasing 3.8-4.2 % compared with the last crop. And especially in India, it is estimated to increase 14.4%. On the contrary, rice output in 2003-2004 crop is predicted to decrease dramatically in Japan and America 7.2-7.3%.

Vietnam’s competitors in rice exporting are Thailand, America, India and Myanmar. Thailand has always competed with our country in exporting long-grain rice of high quality and has been the leading county in exporting this king of rain. Thailand’s rice price is often 10-15% higher than our country’s for rice of the same rank of quality. . There are many reasons for this but the main reason lies in the fact that this country has diversified market systems through marketing and thanks to preferential policies. Thailand’s main patrons are Asian countries (over 50%) and countries in Africa and in the Middle East. At present, the major exporting market of Thailand is Africa with the quantity increasing from 1.5 million tons (in 1998) to over 3.5 million tons (in 2001) (in this year, the amount of rice exported into Asian markets is over 2 million tons). America has about 1% of the farming land area for growing rice (about 1.4 million ha). This competitor usually exports long grain rice of high quality. America’s rice price is even higher than Thailand’s about $30-50 per ton due to high diversified quality, careful

examination of quality and low risk. America does not pay attention to low-quality rice markets. India is a big rice exporter and has made breakthroughs in this field. In 1995, it was the first time this country had exported 3.5 million tons of rice, 5 times bigger than in 1994. This country competes with Vietnam in the low quality rice market. However, this country is far from Thailand in marketing and transportation. Myanmar has the rice growing land area of 5—6 million ha. This country often exports rice of low quality (25% is broken grains). Each year Pakistan exports about 0.5 million tons of long grain rice which has high productivity to the countries in the South and Southeast of Asia and exports about 250 tons of long grain scented rice to the Middle East countries.

The Mekong Delta rice export output makes up 90%. Accordingly, rice exporting has direct influence on the production of farmers in the delta. Vietnam now is at a high competitive advantage in rice exporting. However, our rice is still of low quality, so improving rice quality is very necessary. Nevertheless, we should count our competitiveness against Thailand, in case we cannot win the market for high quality rice but also cannot maintain our market for low quality rice. How long we can prolong our competitive advantage in rice producing while many other countries that have cheaper working force are sharing rice market. Opportunities for exporting rice always exists but we should take rice exporting strategy and the relationship between this strategy and rural agricultural development into consideration.

Apart from exporting rice, the Mekong Delta’s production also has domestic markets. Rice produced in the region is transported to provinces which are in the shortage of food or even to the Red River Delta during between-crop period for breeding production.

Fruit Tree MarketIn the Mekong Delta, fruit tree growing has developed strongly. At present, fruits are often consumed in domestic markets and Chinese markets, which are easy-going markets. However, when AFTA comes into effect, fruits produced in this region will be put at a disadvantage in competing against cheap and good fruits from regional countries such as Thailand. The market for fruits has not been stable in recent years, there has usually been overproduction and underproduction because of the fact that there has been no adjustment in the number of processing factories. The quality of raw products used for processing is low; therefore, the processing cost is high which, in turn, increases products’ prices and the processed products’ competitiveness is not high.

Industrial Tree MarketsIndustrial trees grown in the region such as sugarcane, jute…have not gained stable position in both domestic and foreign markets. In integration, many products will be competed and may lose their positions in the market. The production output of sugarcane, cotton and pineapple …has grown slowly and unstably. The operation of different branches is not efficient and the transactional cost is often put up. This hinders the competitiveness of these branches in the market.

Breeding Product Market

The region is self-sufficient in most of the products from breeding activities, only a small amount of these products are supplied to Ho Chi Minh City. At present milk cow raising is expanding but its production value accounts for a small percentage in the structure of breeding production. The market for milk is still left open, so if milk production is better invested, winning a position for milk products in the market probably is not the matter. But there is a high risk in raising milk cows, so occupying the milk market is not easy at all. Poultry meat products are consumed both in the region and in Ho Chi Minh City. Yet, chicken flu epidemic has made this market frozen at the moment.

3.2.4. Diversification feasibility

Diversification of intra-branchThe strongest point of the Mekong Delta is food cultivation; diversifying rice into different quality levels will helps to lessen the risk and enhance competitiveness of the region’s rice exporting. This process is taking place but it is still dispersed. We can set up different channels for input service, producing, processing and trading, depending on which sort of rice we are producing. In addition to product diversification, there may be other kinds of diversification such as diversifying modes of producing and supplying seedlings, processing and trading in different ways in order to have the most competitiveness of the products.

Agricultural product DiversificationApart from guaranteeing food security for the whole country, we should discover the areas which are possible to be developed into industrial and fruit tree growing area to promote growing trees the region has favorable natural conditions and supply for expanding. These kinds of products should be examined to be processed or to be sold fresh. To expand these products, the simple technology being applied cannot afford, there should be a reconstruction of the production from input, producing, processing and delivering.

Milk cow raising and aquaculture, the new strengths of the Mekong Delta, need to be promoted; products from these two branches in combination with cultivation will create a good balance in the ecological system.

Diversifying aquatic productsAlthough aquatic products now strong points at the moment, the production scale of this branch should be considered for it has influence on the natural environment. Moreover, the production of aquaculture in the recent time has been industrialized which requires strong investment. This is difficult for needy households to participate into aquaculture production and they are seemingly the outsiders. Consequently, excessive expansion of this branch will make a large number of farmer households poorer and will have bad effect on rural development. Experiences from many Africa and Latin-American countries show that, many countries that are successful in exporting agricultural products, still poor and underdeveloped as that exporting activity does not serve agricultural development in general.

Diversifying Forestry ProductsForestry should be promoted to preserve ecological balance in the Mekong Delta. If the forest area becomes more and more narrow, it will be difficult for other branches to develop stably. Developing forestry production should be combined with the development of ecological tourism, and proper exploitation of forest.

3.2.5. Constraints

High Risk of the MarketThe region’s economy depends a lot on the exporting market, whereas, most of the exported goods are raw products. Thus, the market risk is higher than products that are processed and have trade names. Little research is done on foreign markets, which have great influence on production.

Contradiction between economic development and rural developmentThere has been a big contradiction in the region; that’s benefit from economic growth does not augment rural development like in other regions. Although the region is the biggest exporter in the country, there are many impoverished farmers whose education and social welfare is of the lowest level in comparison with other region in our country. If the contradiction is compromised, there will be instability in socio-economic developmentOur research shows that the movement in the general economic structure of this region is much slower than that of other regions in our country. . Most of large-scaled projects on development and rural development by the government focus mainly on well-off households who take part in producing goods for export.

Poor infrastructureThe region’s infrastructure is not in accordance with its development and potentiality. This is because of high cost in constructing infrastructure. These drawbacks are obstacles in diversifying non-agricultural production activities, in expanding local markets and in developing collecting network in the remote areas.

Constraint potentiality for technology developmentThe Mekong Delta is a vast plain, but there are few institutes or centers of science and technologies, the density of these centers and institute is smaller than the nation’s average. Poor infrastructure has hindered the settling of investigating and experimenting systems in the region.

Low education standards of the PeopleThe Mekong Delta’s intellectual standards of the people are not under standard levels, but the intellectual premises are not corresponding with the region’s position and still lower than many other regions’ in our country. The low intellectual standards are remarkably an obstacle in the rural development.

3.2.6. Prospects for Further Diversification

High degree of specialization and professionalizationProduction in the Mekong Delta has been under specialization. Specialization should be promoted in household production to diversify production and lesson the risk. One of the disadvantages of the region is that production has excessively expanded in a short time, so production organizing, quality controlling, and commercializing products are not highly professional. In this region production is mainly for exporting; therefore, lack of professionalization in production will results in high risk of the market.

Promoting product diversification in small scaleThis is the solution to helping small and needy farmer households to find the own way for their products to survive in the domestic market. Handicraft production of small scale should be enhanced to bring high benefit to needy farmer households in a closed circular from producing to selling.

Expanding seedling production in farmer householdsThe quality input seedlings need to be improved by expanding seedling production in farmer household. These households should be helped to set up self-management associations through which the households can have trade names for their products with quality registration. The government should support and control the operation of these associations. The establishing of these associations enables flexibility in changing and supplying seedlings and complements weaknesses and limitations of the present systems for seedlings.

Helping farmers to establish voluntary unified associationsAt present, there are few associations or organizations for farmers, and most of these are not self-reliant and depend mainly on the government. Organizing farmers into associations will allow the controlling of product quality, improving quality and reducing production cost as well as enhancing supply of products. In the integration time, establishing farmer associations is a pressing task in order to help them establish combinations with output agents and set up team trade names…

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