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Macro Policy Analysis onTrade Liberalization,

Agriculture and Gender inVietnam

By Pham, Tuong Vi and Michael KaradjisWith contribution from Han, Tuyet Mai

Center for Natural Resources and Environmental Studies, VietnamNational University, Hanoi

March 2003

Report for Gender and Trade Workshop

Phnom Penh, June 23-30 2003Womens Agenda for Change/Oxfam Hong Kong,

CambodiaFunded by Oxfam America

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Contents

Introduction ……………………………………………………….. 5

Introduction to gender aspect of the study …………………………… 5

Chapter 1: International driving forces of the tradeliberalisation push ……………………………………………………… 6

1.1 World Bank and IMF policy conditionality in the PRSP

process …………………………………………………………….. 6

1.1A Country-owned? ………………………………………… 7

1.1B Consultation with the poor – what do the poor say? ……….. 8

1.1C World Bank recommendations on agriculture …………….. 9

1.2 Asia Free Trade Area (AFTA) ……………………………….10

1.3 World Trade Organisation (WTO) ………………………….11

` 1.4 Bilateral Trade Agreement (BTA) …………………………..12

Chapter 2: Vietnamese Government Policy ………………………….. 13

2.1 Poverty Alleviation ………………………………………….. 13

2.2 Trade and Economic Liberalisation ……………………….. 13

2.2 Gender ……………………………………………………….. 16

2.3 NGO comments on the strategy ……………………………. 17

Chapter 3: Rationale for trade and economic liberalisation ………... 18

3.1 Agriculture …………………………………………………... 18

3.2 Gender ……………………………………………………….. 19

Chapter 4: Problems with the Rationale ……………………………… 20

4.1 Agriculture …………………………………………………… 20

4.2 Gender ………………………………………………………... 22

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Chapter 5: Review of major issues of trade liberalisation

in agriculture …………………………………………………………... 26

5.1 Food Security, export cash crops and diversification ……. 26

5.2 Export crop price crashes ………………………………….. 27

5.2A Coffee price crash ……………………………………… 27

5.2B Price crashes of other export crops ……………………… 28

5.3 Import surges destroying local agriculture ……………….. 29

5.3A Maize and Soybeans …………………………………… 29

5.3B Cotton ………………………………………………… 30

5.3C Other challenges ………………………………………. 325.4 Fruit: Price crashes threaten export valueand import surge ……………………………………………….. 32

5.5 Rich country protectionism – the case of aquaculture …... 35

5.6 Removing export quotas and licensing restrictions ……… 37

5.6A Rice export quota ……………………………………… 37

5.6B Rice export licensing restrictions ………………………. 39

5.6C Coffee and rice export deregulation and price crashing …. 40

5.6D Better ways of helping marginal rice farmers …………… 415.7 Removing import quotas and licensing restrictions- fertiliser …………………………………………………….... 42

5.8 Export intensification, environmental degradation anderosion of traditional practices ……………………………….. 43

5.8A Seeds, TRIPS and Women’s Knowledge ……………….. 43

5.8B High tech fixes versus traditional methods in agriculture ... 45

5.8C Environmental degradation and aquaculture …………... 47

5.9 Gender and food security, cash crops and diversification .. 50

5.9A Women and cash crops …………………………………. 50

5.9B Women and rice export deregulation ……………………. 52

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Chapter 6: Trade Liberalisation and Economic Structure …………. 52

6.1 ‘Level Playing Field’ ………………………………………... 52

6.1A Gender and ‘level playing fields’ ………………………... 55

6.2 Cooperatives and ‘land markets’……………………………55

6.2A Gender, cooperatives and land markets …………………. 56

6.3 Agricultural Planning ………………………………………. 57

Chapter 7: Globalisation, Privatisation and Services ……………….. 58

7.1 Services in general ……………………………………………58

7.2 Credit ………………………………………………………… 59

Chapter 8: Agriculture, Industry and Globalisation ………………… 60

8.1 Textiles/garments …………………………………….……… 64

Annex 1: International Implementation of Neo-LiberalPolicy Prescriptions ……………………………………………….…… 66

References ………………………………………………………………. 70

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Macro Policy Analysis on Trade Liberalization,Agriculture and Gender in Vietnam

By Pham, TuongVi and Michael KaradjisWith contribution from Han,Tuyet Mai

Center for Natural Resources and Environmental Studies, Vietnam National University, Hanoi

IntroductionVietnam’s economic liberalisation process began in 1986, opening the economy to private andforeign capital, liberalising most domestic prices, and making the farmer household the basic unit ofproduction. However, the Government continued to stress the dominant role of the state sector, thatcooperatives would regain a significant role, and global trade liberalisation proceeded slowly.

Vietnam’s cautious reform led to economic growth of 7-8 per cent per annum in the 1990’s, andpoverty crashed from 58 percent in 1993 to 32 percent today. Education and health indicators,already high for a country at Vietnam’s economic level, have improved. However, inequality hasrisen; in many poor regions, social indicators are far below the national average, particularly inmountainous areas, among ethnic minorities1 and among the vast number of war disabled and AgentOrange victims.

Vietnam’s current program of deeper economic and foreign trade liberalisation results from the pushby the International Monetary Fund (IMF) and the World Bank (WB) to ‘restructure’ economies ofdeveloping countries as “conditionalities” for development loans, and the dropping of nationalcontrols on trade to enter the World Trade Organisation (WTO).

Developing countries dropping trade barriers and “restructuring” their economies have rarelybenefited; many have suffered disastrous failures. Can Vietnam can acquire the perceived benefits ofwhile avoiding the negative impacts?

This research on foreign trade liberalisation focuses on agriculture, how this will impact on poverty,and how increasing or decreasing poverty, and other effects of trade liberalisation, affect genderinequality. However, agriculture is not isolated from trade liberalisation in industrial goods,‘equitisation’ of SOE’s, private sector deregulation, new export industries, developing ‘landmarkets’, privatisation of basic services and other aspects of the liberalisation ‘package’.

Introduction to gender aspect of the studySocieties with greater gender discrimination tend to experience more poverty, slower economicgrowth and inferior living standards than societies with greater gender equality.2 Hence, Vietnammust consider the impacts of trade liberalisation on women, particularly female farmers.

There are different groups of women affected in different ways:

! Women who are the heads of households, accounting for 17 percent of rural households, who“are more vulnerable to the shocks that lead to a decline in living standards.”3

! Women in male-headed households.

! Female children, who are more likely to be withdrawn from school early due to poverty.

In assessing the impacts on gender, a number of aspects need to be taken into account.

1 As opposed to the rest of the country, more ethnic minority people fell into poverty in 1993-98 than escapedfrom it, Justino and Litchfield, 2002, Table 3,6, p32, 342 Gender Action, 20023 FAO/UNDP, 2002

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Firstly, if trade liberalisation results in increased rural poverty, does this have a greater impact onwomen?

Secondly, do women stand to gain from the perceived ‘opportunities’ of trade liberalisation?

Thirdly, does the Vietnamese Government’s program specifically aim at alleviating the impact ofthese changes on women or promoting equality of opportunity regarding the perceived gains?

Women constitute approximately 54 per cent of the labour force in agriculture.4 Agriculture is highlyimportant to women as it produces food for their families who they are responsible for feeding, andis the principle source of formal and informal employment for rural women. Women participate inall agricultural activities, playing the main role in rice production, husbandry, processing andmarketing.5 Statistics of women’s participation underestimate the true amount of work carried out bywomen, because their work in the informal sector, especially that involving food production andprocessing for household and community consumption, is often not classified as ‘work’ and isdisregarded in official statistics.

Most women work in the informal economy, undertaking household activities, subsistenceagriculture, growing vegetables in home gardens, setting up tiny household businesses, and small-scale trading in local markets. Being the traditional food providers, increasing poverty drives womento intensify such activities to keep food on the table and children in school.

Families driven into poverty lose the ability to pay for basic services such as health and education,which IMF/WB policies have put ‘on the market’ in lending programs the last 20 years. This furtherexpands women’s traditional caring role, reducing time to engage in income earning activities.

Hence increased poverty will drastically affect women. Despite the official equality of women inVietnam’s constitution, poor rural areas are still influenced by traditional patriarchal cultureemphasising women’s domestic and household economy burden. This limits their ability to escapepoverty or take advantage of alleged ‘opportunities’, by attending classes to learn new skills,applying new farming technology, growing ‘high value’ crops or setting up ‘small and medium’agricultural businesses that trade over wider areas or export.

Chapter 1: International driving forces of the trade liberalisation push

The push for greater trade and economic liberalisation stems from a number of sources:

! Firstly, the WB and IMF have played a core role in setting Vietnam’s economic policy in thetransition to trade liberalisation. The WB put forward policy proposals in 1998, called itsCountry Assistance Strategy (CAS), adoption of which was necessary for Vietnam to receiveloans from the WB Poverty Reduction Support Credit (PRSC) and the IMF Poverty Reductionand Growth Facility (PRGF). Vietnam prepared an Interim Poverty Reduction Strategy Paper (I-PRSP), followed by consultation inside the country. The final PRSP, known as theComprehensive Poverty Reduction and Growth Strategy (CPRGS) was accepted by the WB/IMFin 2002 as a basis for lending as part of a poverty alleviation strategy.

! Secondly, Vietnam is required to drop a host of trade barriers to goods from other Asiancountries to attain full membership in the Asia Free Trade Area (AFTA) in 2006.

! Third, the Bilateral Trade Agreement between Vietnam and the US mandates trade andinvestment liberalisation in relation to US companies and goods, based on WTO standards.

! Finally, trade barriers to goods from around the world are to be progressively eliminated, andother deregulatory measures introduced, to join the WTO. Government leaders are now talkingof rapid WTO entry, possibly as early as 2005.

4 National Committee for the Advancement of Women, 2000, p155 Sultana P., and Nga T.T., 2002, p193-201.

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1.1 World Bank and IMF policy conditionality in the PRSP process

In late 1998, the WB released a memorandum on Vietnam which stated that certain types of loanswould be conditional on Vietnam carrying out policy changes. This conditionality was endorsed bythe sixth meeting of the “international donor community” (ie large creditors such as IMF, WB, ADB)in December 1998. Some $US500 million in assistance was made contingent on Vietnam adopting athree point program for 1999, involving a state enterprise “reform” program with timetables andtargets for SOE’s to be restructured, equitised, or sold, a banking reform program and a 3-year tradeliberalisation plan, with clear targets for each year.

However, the WB/IMF claim their current lending strategy is different from previous programs inthat:

! It gives clearer emphasis to poverty reduction within the overall economic package

! It is ‘country-owned’ because the PRSP is prepared by the country’s government – the CPRGSis based on the Communist Party’s 5-year and 10-year Socio-Economic Development Strategypapers at the 9th National Congress of April 2001

! They involve consultation with the poor, who in a series of meetings are encouraged to give theiropinions on the strategy and on their perceived needs

1.1A Country-owned?However, according to the IMF, PRGF conditionality remains, but is “limited to measures that havea direct and critical impact on the program's macroeconomic objectives.”6 Hence, the Governmentmay draft any policies they like on poverty reduction, but the macro-economic framework is set bythe lenders and must be accepted if the funds are to be made available. Regarding establishing “anenvironment conducive to private sector growth, trade liberalization, and financial sectordevelopment” responsibility would be shared between the IMF and the WB.7

The WB’s Country Assistance Strategy (CAS) is not “owned” by the country, its fundamentals mustbe agreed to. Its 1998 CAS for Vietnam 1999-20028 lays out “triggers” for Vietnam to be eligible for‘high case’ lending. In 2001, the WB noted that the triggers “have not been met on trade policy.Specifically the initial trigger requiring that all qualitative restrictions (QR’s) should be converted totariffs, and that the maximum tariff should be lowered to 40 percent have not been met. QR removaland tariff reduction are included as conditions in this proposed operation.”9

Other CAS triggers include equitation of 1000 SOE’s by 2000, with 100 having assets in excess ofVND 15 billion, closure of unviable/insolvent banks and complete restructuring of viable ones by1999,10 stopping bank funding of ‘delinquent SOEs’, allowing all firms to register as importers in1998, encouragement of Private Provision of Infrastructure (PPI), private sector entry and “self-financing” in energy and water, deregulating foreign equity investments in domestic enterprises11,eliminating interest rate caps, allowing mortgages to be taken by foreign banks, and “a road map fortrade reform for joining the WTO.”

It is thus clear that Vietnam’s policies on poverty may be “country-owned”, but the entire macro-economic framework has been unambiguously set as “conditions”.

6 International Monetary Fund, 20007 ibid, Point 178 World Bank, Country Assistance Strategy – Vietnam, September 22, 19989 World Bank, Poverty Reduction Support Credit, Point 77, “Status of CAS Triggers’, 200110 World Bank, Country Assistance Strategy – Vietnam, Annex, ‘Triggers for Bank Lending Scenarios’11 The CAS notes that “the new investment law has made some progress by allowing foreign investors,including IFC, to take an equity stake of up to 30%, but a further relaxation to take equity positions in domesticenterprises investments could support the equitisation program”.

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1.1B Consultation with the poor – what do the poor say?Vietnam undertook far more consultation with the poor than is the norm with IMF/WB programs,though still only involving consultation with six poor communes in a country of 80 million.

The Ministry of Planning and Investment (MPI) undertook consultations with poor communities inTra Vinh, Vinh Long, Ho Chi Minh City, Ha Tinh, Quang Tri and Lao Cai, with teams from OxfamGB, Catholic Relief Services, Save the Children UK, ActionAid, International Plan and the WB.

ActionAid carried out a consultation in four poor villages in Ha Tinh in 2001,12 with 299 people (101women and 198 men). The poor believed that poverty has declined due to “effective governmentpolicies” (credit, health support, irrigation and road construction, land allocation), agricultureextension services (crop and fruit production and protection, veterinary services, flexible creditservices for inputs), improved technology (through which farmers increased rice production by 50percent), support from organisations such as Bank for the Poor, KfW, and ActionAid which helpedcreate jobs, increasing involvement in off-farm activities (opening shops, trading and working aslabourers), reduction of population growth rate (to 1.04% in 2000) allowing more time forproductive activities, and increasing export of seafood.”

Their priorities centred on rural development so that farmers could produce more, development ofoff-farm activities, better infrastructure, improved access to education and health, people’sparticipation in planning and managing development and help in coping with natural disasters.

Villagers have problems entering into cash crop and commodity production due to lack of funds formechanized implements, good seed and livestock, dependence on outside sources for seed, andunstable markets with low prices. The poor are forced to sell at unfavorable times (straight afterharvest when prices are low) to pay loans, fees, contributions or for any urgent expenditure.

While much diversification has taken place (aquaculture, fruit-growing, industrial crops) as well asincreasing off-farm employment (trading, small scale processing, carpentry, forestry), none areconsidered stable income sources. Villagers were advised to grow sugarcane and garlic but latercould find no market, a typical case of overproduction for unstable export markets for cash crops.

Villagers requested Government agricultural land mapping for suitable crop selection, stateassistance in identification of species of crop or livestock which are suitable for local economic andnatural conditions, increased agricultural prices, price support policies, and provision of long andshort term credit, including continuation of current preferential interest rates for poor households –all policies directly counter to WB advice.13 They also advocated reduction of agricultural tax, feesand contributions, and health and social insurance and crop/livestock insurance for farmers.

Since 1999, they claim loan sizes have increased, credit is more accessible and proceduressimplified, sources for credit have expanded (women’s credit fund, job creation fund, hungereradication and poverty reduction fund), and monthly interest has been reduced from 1.2% to 0.5%.They advocated special provision for loan extension or cancellation for poor households who couldnot repay loans in time. One group proposed a credit scheme with no interest for poor households,connected to the existing well run self rotating credit units.

Women had less opportunity to take part in social activities and decision-making, and said that themother and child care programme, gender training and awareness raising, and putting women’snames on documents such as the Land Tenure Certificate, were ways to ensure that women benefit.Many women believed commercial interest rates were still high, loan amounts low and the lendingcycle short. They said more women should participate in training in using loans for production.

Villagers suggested that disabled students’ educational contributions should be reduced or exempted.They claimed that incorrect classification of poor households occurs, and called for bettermobilisation of funds for education, and better pay for teachers. They also complained that only the 12 ActionAid Vietnam, December 200113 That is, against the World Bank’s major agricultural paper, Advancing Rural Development, 1998

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head of the certified poor household gets a card, and the procedures for using cards are complicated.Getting treatment on time means paying extra. Poor facilities, low budget, lack of sufficientcommune staff and the distance to the district health center were other problems. They asked forequipment and medicine for remote areas and free medicine for elderly people and children.

They also called for reduction of all contributions and fees for the poor, adjustment of land allocationin favour of poor households, and vocational training for children of poor households. They claimedthat families falling into poverty did receive Government assistance, but to make this more effectivethey wanted cooperation between the responsible persons and the target group, close participatorymonitoring, and evaluation. Construction projects should employ labour from the local area.

Clearly, there was zero in the discussion re global trade and economic liberalisation policies whichare going to have a massive impact on the poor and which are fundamental to the IMF/WB lendingstrategy. Most of what was recommended by the poor can be described as state interventionist,subsidy-based and redistributive, rather than ‘market fundamentalist’.

Similarly, in Tra Vinh and Vinh Long, the poor want direct links to exporters rather than goingthrough private middlemen, subsidised prices and guaranteed markets, subsidised credit and loanswithout collateral, and want the country to import less of what can be produced at home. These areall anti-liberalisation views. Unfortunately, some NGO’s felt obliged to add inherited neo-liberalwisdom. Regarding subsidised credit, Oxfam added “though this is unsustainable”, and regardingsubsidised crop prices, CRS added “however, international best practice shows this is not effective.”14 This seems inappropriate for NGO’s to add to reports on the views of the poor.

1.1C World Bank recommendations on agriculturePolicy directions for Vietnamese agriculture, consistent with the trade liberalisation framework, wereadvanced by the World Bank in 1998.15 The major recommendations were as follows:

! The state should not try to plan production, such as setting aside land for staples. “Agriculturalproduction and marketing controls, including restrictions on alternative uses of paddy land,which inhibit diversification into higher valued crops” should be removed; “diversificationshould proceed as farmers freely responded to changes in market prices.”

! There should be no import or export quotas even on strategic products, and state trading bodiesshould also have no more rights than private companies or foreign multinationals in import andexport of any product. The export quota on rice and import restrictions on sugar, fertilizers, andseeds should be removed, and import/export of these products should be opened further toprivate businesses. The quantitative and licensing restrictions allegedly result in lower prices andhigher costs for farmers.

! Development through the private sector is preferred, because private firms, whose aim is profit,produce more efficiently. A “level playing-field” for state, domestic private and foreignenterprises, “irrespective of type of ownership, size, area of industrial activity, or location”,disallowing the state preference in any area it believes necessary to temper the “market” or tobuild national industries. “Only enterprises able to earn profits should survive”.

! The competitive spirit of poor people developing tiny household businesses will lift them out ofpoverty; the more successful will become ‘small and medium enterprises’ which will generateemployment for those who fail. However, even these small local private firms should not beprotected against multinationals

! Ceilings on land holdings should be removed, as they prevent ‘efficient’ farmers gaining moreland; such farmers will invest in ‘small and medium’ businesses, providing jobs to the poor. Theperiod of land-use rights should be lengthened to 50 years. “A functioning market in land-use

14 ‘Oxfam GB, 2001, and Catholic Relief Services, Vietnam, 200115 World Bank, 1998 II

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rights” would allow banks “to have use-rights to mortgaged land so that they can transfer theserights at market value;” at present, “even where land use rights are used as collateral, creditorsare not allowed to exchange, transfer, or lease them.” “Those few who may lose all means oflivelihood”, should “receive the full value of their land,” and be covered by “social safety nets.”

! Cooperatives should not be given preference over other forms of agricultural organisation; “theGovernment should not discriminate in favor of them.”

! Trade protection and credit policy favours capital intensive state industries which do not createemployment; if such industries go under when unprotected, the country can more cheaply importsuch goods, leaving more credit available for labour–intensive export industries and agriculture.

! Moreover, such protection raises the cost of “plant, machinery, and other purchased inputs,” so ifthey collapse it will mean cheaper import prices for inputs into new ‘competitive’ industries, andpoverty will be directly reduced if the country imports more consumer goods, as the poor willpay lower prices than for locally produced goods

! Services like water, electricity, telecommunications, health and education should be open to theprivate sector (ie multinationals), bringing ‘more efficient services’ to the poor. “Private sectorinvestment in energy” should be encouraged, and irrigation, water supply and otherinfrastructure should be provided “on the basis of full or partial cost recovery.”

! Foreign banks should have the same rights as local ones in all fields, and local and foreigninvestors should have the right to mortgage land to foreign banks. There should be no caps oninterest rates, rural credit to be supplied at market interest rates, and subsidised credit (which is“unfair competition to microfinance programs based on market interest rates”) should beabolished. This would lead to greater credit supplies and hence more access for the poor.

1.2 Asia Free Trade Area (AFTA)

Membership of the Asia Free Trade Area (AFTA) requires tariffs on Asian products to be reduced toa maximum of 0-5 per cent by 2005 (brought ahead from the original 2006 deadline). Vietnam has sofar put 5,500 out of its 6,400 import tariffs on the AFTA inclusion list (85%), and pledged to move760 items off the temporary exclusion as of January 2003, meaning tariffs on 96 per cent of all goodswould be reduced by early 2003, though this has now been extended to July 2003.

Products like vegetable oil, chemicals, fertiliser, rubber, pulp and paper, wood and rattan products,with tariff rates of over 20 percent will have them reduced to 0-5 percent by 2003; for those withrates already under 20 percent, the rate was already reduced to 0-5 percent as of January 2001. Forproducts such as cement, building materials, machinery, equipment, iron and steel, rates over 20 percent (some around 40-50 percent) will be reduced to 20 per cent by 2003 and 0-5 percent by 2005;those with tariffs below 20 percent will have them reduced to 0-5 percent in 2003.

For most goods, tariffs must be reduced to zero by 2013, 60 per cent of them by 2006, and forinformation and communication technology products by 2008. All quantitative restrictions must belifted by 2003, and all other non-tariff barriers (foreign exchange restraints etc) by 2006.

There is also a “sensitive list” covering unprocessed agricultural products under 51 tariffs. They mustundergo full tariff reduction by 2013. However, if Vietnam enters the WTO earlier than this, it mayhave to bring this date forward. A “temporary exclusion list” of 139 products will not haveprotection reduced for the foreseeable future, though this is currently under discussion.16

16 ‘ASEAN Advances Vietnam’s Deadline for Regional Integration’, Viet Nam News, August 27 2002; ‘AFTAMembership May Mean Some Industries Go Under, Officials Caution’, Vietnam Investment Review, August12-18 2002

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1.3 World Trade Organisation (WTO)

Vietnam now aims to attain membership of the WTO by 2005-07. The impacts of this will be fargreater than AFTA membership. While there are richer and poorer countries within AFTA, theeconomic distance between them does not compare with that between poor countries and the richestdeveloped countries in the WTO.

The purported benefits of this are that, with the future dropping of trade barriers in rich countries toVietnamese products, the latter, with their cheaper cost of production, will acquire large newmarkets. But the dropping of Vietnam’s trade barriers to rich country products will mean theseproducts, produced with the latest technology and usually heavily subsidised, will also massivelyenter the Vietnamese market and compete with local products.

The main agricultural/trade policy changes Vietnam will need to implement are the following,contained in the WTO Agreement on Agriculture (AoA):

Firstly, removal of “distortions” to imports. This means firstly removing all non-tariff barriers (egquotas and qualitative restrictions) and replacing them with tariffs, and then the radical lowering ofthese tariffs. Under ‘minimum market access’ provisions, all countries must allow at least 4 per centaccess to any agricultural product, even those in which it is self-sufficient.

Secondly, “distortions” to exports, such as export subsidies, quotas and restrictions, must beremoved. While Vietnam has no agricultural export subsidies, there are export quotas, andsometimes small duties on successful exports to finance the Agricultural Price Stabilisation Fund(APSF), to support producer prices when they are too low.

Thirdly, Vietnam will have to remove “distortions” to domestic production, which may give an“unfair” advantage to local producers. These may include the APSF,17 or the subsidised prices ofmany essential goods (eg seeds, fertilisers) offered to poor farmers by agricultural SOE’s.18

Next, some farm products are or have been subject to import licenses (seeds, fertilisers, animal feed,livestock, farm chemicals, veterinary medicines). These “will need to be administered in a far moretransparent and rules-driven manner.”19 The state will be unable to control such imports via SOE’s orrestrictions on private sector or FIE importers.

Finally, the state would not be allowed to offer any preferences to State Trading Enterprises (STE’s),removing the ability of the state to have any control over quantities or prices of imports or exports.“Reform could take the form of privatisation (or at least corporatisation) and de-monopolisation ofSTE’s to make them compete with the private sector.” Likewise, the General and SpecialCorporations set up in the 1990’s, in which large numbers of SOE’s are joined in a corporatestructure and cover many aspects of the market, “may be viewed as barriers to entry by would-beimporters to (or foreign investors in) Vietnam of competing products.20 In particular, several largeagricultural SOE’s (eg the Northern and Southern Food Corporations) which may cover inputs,production, processing, distribution and export, may be considered “barriers”.

WTO membership also includes other policies which will impact greatly on Vietnam’s economy:

According to the WTO TRIPS agreement, intellectual property rights must be extended to geneticresources for food and agriculture, specifically micro-organisms, including genetically engineeredorganisms. TRIPS, which protects the patents of private companies and individuals, alsodiscriminates against indigenous and traditional farmers and communities for whom knowledge iscollective and intergenerational. “Intellectual property rights are against the very nature of this kindof knowledge,” according to Dr. Sothi Rachagan, regional director of Consumers InternationalRegional Office for Asia and the Pacific. “Patent holders or companies expropriate such knowledge 17 Anderson, p 3618 Examples given in Oxfam’s Rice for the Poor report 200219 Anderson, p 3620 ibid p 37

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from the true innovators and transfer it to themselves by ‘treating’ it in a laboratory. Centuries oftending and selection of seed by communities are not acknowledged and someone who builds on thisinherited knowledge is allowed IPR to become the legal owner of all this community knowledge.”21

This has led to the unfair patenting of their agricultural biodiversity by corporations, examples ofwhich have been documented by Action Aid.22

Secondly, according to the WTO TRIMS agreement, many devices which developing countries havelong used to make foreign investment work better for recipient countries will now be banned, as theyconstitute a “barrier”. This includes localisation rates (setting a percentage of locally producedcomponents which must be used in assembly) and conditioning investment on technology transfer.23

Thirdly, full trade liberalisation under the WTO opens all services to ‘competition’ without anybarriers to the private sector or foreign TNC’s. ‘Services’ range from health and education to water,electricity and communications to banking, insurance and tourism (see Chapter 7).

1.4 Bilateral Trade Agreement (BTA)

The Bilateral Trade Agreement (BTA) with the US is based on WTO rules, so along with AFTA, itis a ‘mini-WTO’. All the TRIPS, TRIMS, equal ‘national treatment’ of US enterprises and servicesprivatisation required by the WTO are in the BTA. US enterprises will be able to enter joint ventureswith Vietnamese partners in all products, including majority ownership after 3 years; after 7 years,100 percent US-owned companies will be able to to engage in trading activities in all products.

Some TRIPS provisions have been dubbed ‘TRIPS Plus’ because they strengthen WTO provisions.The BTA states that Vietnam “shall promptly make every effort to accede to” UPOV, while there isno explicit reference to UPOV in the WTO. UPOV (International Convention for the Protection ofNew Varieties of Plants) is a special kind of patent system crafted in Europe for commercial plantbreeders, to which mostly industrialised countries subscribe.24 UPOV does not allow farmers tostore, replant or develop new plants from protected varieties, they must buy new seeds every year.

The BTA also mandates Vietnam to provide patent protection on all forms of plants and animals thatare not varieties, as well as inventions that encompass more than one variety, whereas TRIPS allowsthe exclusion of plants and animals from patent protection. It also stresses that, while “essentiallybiological processes for the production of plants or animals” may be excluded from patentability, thisdoes not include “microbiological processes”.

Following is a summary of some of the main changes in relation to trade under the BTA:

Within 3 years of the BTA, tariffs have to be cut by 25-50 per cent on most agricultural products.

All quantitative restrictions will have to be removed on imports of meat, milk, citrus, corn,soybeans, oils, vegetables, fruits, nuts, fruit juices, wines, instant coffee, coffee products and shrimpfood within 3-5 years, and on sugar within 10 years. On industrial products, they must be removedon many products. Those most relevant to rural areas include fertilisers, ceramic products, paper andpaper products and silk fabrics in 3-5 years.

The only export quantitative restrictions are those Vietnam from time to time imposes on rice; inthe BTA, the Government has insisted on an “unbound” situation for rice exports, meaning thatVietnam is not bound to phase them out such restrictions.

A number of imports currently subject to state trading, such as fertilisers, must go within 5 years;the few exports subject to state trading (including rice) have remained in the “unbound” category.

21 ‘International conventions don’t even out unequal servings’, Viet Nam News October 3, 200222 Action Aid Crops and Robbers, October 200123 See TRIMS provisions of the US-Vietnam Bilateral trade Agreement24 GRAIN, 2001

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Next are the various restrictions on import trading and distribution rights. Such restrictions willhave to be phased out for meat, milk, oils, maize, soybeans, animal feed, vegetables, fruits, nuts, fruitjuices in 3-5 years. Restrictions of import trading rights will have to be phased out for wheat andsugar must go within 5-6 years, but restrictions on distribution rights are “unbound.” Restrictions onboth import and distribution rights on rice remain “unbound”. On industrial, those most relevant toagriculture are paper and paper products, cotton and silk fabrics and ceramic products within 5 years;import rights restrictions on sugar, salt and antibiotics in 3 years, and on fertilisers and insecticides in5 years, while distribution rights restriction on all these products remain “unbound.”

The few restrictions on export trading rights will have to be phased out in 7 years for coffee andrubber, while such restrictions will remain “unbound” for rice.

Chapter 2: Vietnamese Government Policy2.1 Poverty Alleviation

Vietnam’s national poverty alleviation program has spent 21 trillion Dong ($1.4 billion) from 1992to 2002 (9.6 trillion in 1999-2000 alone), plus various other programs and the Bank of the Poor.

The CPRGS aims to double GDP and reduce poverty by two fifths (and food poverty by threequarters) by 2010. Targets include raising to 90 percent the number of communes connected to theelectricity grid, and to 85 percent the number of rural households with clean water supply,universalising secondary education, markedly cutting infant and maternal mortality and childmalnutrition, ensuring that 100 percent of communes have clinics, that 80 percent of communes havedoctors and 100 percent of villages have at least primary health-care staff.

This involves markedly expanding the budgets for agricultural development, education, health andtargeted poverty programs, especially in mountainous and ethnic minority areas. However, apartfrom education, these increases merely reflect an expanded overall budget, based on growth targets.

The strategy aims to increase the access of the poor to basic health and education through reductionsand exemptions of fees, extension of free health insurance, exempting ethnic minorities and childrenunder 6 from health charges, allowing the poor to pay later, and extending the boarding schoolsystem for remote regions. It also calls for maintaining subsidies on prices and transport of essentialgoods in disadvantaged areas, loans with zero interest for poor communes to develop ‘self-supplying’ electricity systems, and exempting poor and ethnic minority households from varioustrade and production taxes.25

2.2 Trade and Economic Liberalisation

Much of the poverty program looks good, but to gain ‘donor’ finance to carry it out, the country hasto accept a trade and economic liberalisation program. Integral to the philosophy behind the CPRGSis that rapid trade liberalisation will bring about rapid economic growth, enabling Vietnam to amassthe resources to carry out poverty alleviation. However, there are certain problems with this:

Firstly, whether or not these economic measures lead to economic growth depends as much on theworld economy as on the intentions of the program.

Secondly, whether this economic growth actually leads to poverty reduction depends on how welltargeted the anti-poverty measures are.

Thirdly, if trade liberalisation actively creates poverty, it may reverse or at best neutralise the effectsof the anti-poverty measures.

Finally, trade liberalisation may reduce government revenue for fighting poverty. Drastic cuts toimport and export taxes represent an immediate cut – they account for 20 percent of government

25 All quoted from CPRGS, Socialist Republic of Vietnam, Hanoi May 2002

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revenues.26 The collapse of SOE’s with protection loss could also be significant - they account for 50per cent of revenues.27 Only 10.9 percent comes from the non-state sector, there has been no revenuegrowth from the private SME boom, and even these SME’s are under threat from trade liberalisation.

The major aspects of Vietnamese economic policy in relation to ‘donor’ conditionalities (meaningthey had to be undertaken prior to IMF/WB acceptance of the CPRGS in 2002) or mere‘recommendations’, are as follows:

Private sector development, a conditionality. Vietnam passed the Enterprise Law in 2000 tofacilitate the growth of private SME’s, leading to a quadrupling of the number of registered privatefirms in the last three years, and a doubling of employment by this sector from 400,000 to 800,000.This has clearly had a beneficial effect on poverty reduction. It also revised the Foreign InvestmentLaw to permit automatic registration of export oriented investments, also a conditionality.

SOE equitisation, also a conditionality. By 2002, 450 SOE’s had been equitised, including around290 ‘major’ equitisations (i.e. selling more than 65 percent shares to non-state shareholders with thestate maintaining dominant or special shares) over 4 years. However, the SOE’s equitised weremostly tiny, accounting for some 2 per cent of SOE capital. It further adopted a 5-year SOE reformprogram with annual targets, covering a third of all SOEs, though again accounting for a smallpercentage of SOE capital. However, before the WB releases the ‘second tranche’ money, theGovernment must carry out a great deal more SOE ‘reform’, including lifting ceilings of private andforeign shareholdings and deregulating private entry into certain SOE sectors.

Thus the government is emphasising private sector growth in areas outside the interest of thedominant state companies, rather than privatisation. The ‘slowness’ of SOE equitisation (even in theagreed sectors) decried by the Bank reflects the Government’s real concern about avoiding mass lay-offs. The SOE redundancy package is overall generous, but workers appear to prefer to stay put atthis stage; thankfully, the Government seems unwilling to argue with them. Moreover, the stress on‘equitisation’ rather than outright privatisation, and the Government’s stress on maintainingdominant state shares, or ruling out any equitisation, in most strategic areas, indicates resistance toextreme neo-liberal plans when compared to many other country’s PRSP’s and SAP’s. However, thiswill be challenged by BTA and WTO regulations in the future.

‘Real land market’ and lifting the ceilings on land holdings to allow land concentration, a WB‘recommendation’. There is a clear change from the CPV’s ‘Five Year Plan for Socio-EconomicDevelopment’ at the 8th National Congress in 1996 (“to control the accumulation of arable land,promoting commodity production while preventing farmers’ landlessness) and the 9th NationalCongress in 2001 (“to develop real estate markets, including land use rights ones. To facilitatetransfer of land use rights … to facilitate accumulation and concentration of farm land in advantagedregions”) Yet in the CPRGS, while generally pledging to “continue to revise and amend land laws toensure security and better implementation of land use rights (long term tenure, transfer, inheritance,collateral), there are still no clear changes such as removing land ceilings, extending lease periods orfully privatising land.

The Government still officially imposes ceilings on land accumulation, though there are indicationsthe Party is moving to “permit larger land holdings.”28 However, the CPRGS also pledges to“provide integrated support in the form of credit, seeds and knowledge to help the poor avoid sellingor mortgaging their land,” to “allocate unused land to rural dwellers” and to “ensure the entitlementof individual and collective land use rights of ethnic minorities and mountainous people.” Mediareports indicate land is being distributed among landless households, particularly in the two regionsmost afflicted by landlessness, the Central Highlands and the Mekong Delta.29

26 In 2002, Vietnam collected $US 2.2 billion in import and export taxes27 WB/ADB, Vietnam: Delivering on Its promise, Hanoi, 2002, p12528 Viet Nam News September 28 2002, quoting Politburo member Phan Dien29 ‘Loans put the landless farmers of Tra Vinh back on solid ground’, Viet Nam news, July 26, 2002;‘Government provides land to ethnic minorities in Central Highlands’, Viet Nam News, October 11, 2002

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Given this, the continued stress on the “farm economy” may refer mostly to larger plots gained byfarmers who take initiative to clear “wasteland” rather than by seizing the land of others, or tonormal sized farms engaging in more commercial activity. However, some farms are very large,making the official land ceiling irrelevant; reports on farmers with 600 hectare farms are notuncommon;30 and land concentration is taking place to due seizure of land of indebted farmers.31

No “preference” for cooperatives, a WB ‘recommendation’. Thankfully, this has been ignored.Like the 8th Congress, the 9th National Congress continues to call for “encouraging the developmentof the collective economic sector. To complete the restructuring of cooperatives and revise the Lawon Cooperatives and make it more suitable to the new situation. To develop various forms ofcooperatives. To work out guidelines for training cooperative personnel.”

The CPRGS also has a strong orientation towards encouraging cooperatives. Relevant aspectsinclude “continue to strengthen the collective economy with different types and diverse forms andsizes, on the principles of voluntary membership, democracy, transparency, and efficiency andempowerment of participants of cooperatives … encourage the development of formal and informalforms of assistance among farmers. Strengthen the position of farmers in cooperatives to improvetheir access to bank credit, insurance, extension services and marketing. (p72).

Further, to resolve “outstanding debts of old cooperatives … dissolve cooperatives whose existenceis only nominal and which have no economic basis to develop, and whose members’ participation isnot on a voluntary basis (p51). These measures seem in response to criticisms that some of the newcooperatives were making some of the same mistakes as the old cooperatives.32 In more detail, arecent “Government Action Plan” calls for “completing project for amending and supplementing theCo-ops law to perfect new co-op models; simplifying administrative procedures for co-ops; allowinga wider range of capital contribution models; defining transparent management of people’scommittees at all levels; and defining the responsibility of the director board.33

This plan also incorporates other elements such as “refunding co-ops their investment ininfrastructure”, “income tax breaks for agricultural, forestry and fishery co-ops,” “studying co-opsneeds for training”, “providing social insurance to employees of co-ops,” and “drafting instructionsfor a vocational training policy for the co-op sector.”

CARE International is working on cooperative development together with MARD and the Farmers’Federation, but rather than simply pushing the current model, they are putting resources into actualspontaneous forms of cooperation being carried out by farmers, then later encouraging them toformally register as cooperatives.34 MARD is to launch a full review of cooperatives, to be completeby October.

The Vietnamese media has also been continually reporting on preferential policies for cooperatives,including subsidising loan interest, investing in coops, paying the salaries of managers andaccountants and now a decree is to be passed by the National Assembly “allotting land free of chargeand granting certificates of land use to agricultural cooperatives.”35

A series of trade liberalisation measures adopted by the Government were also conditionalities,including adopting the AFTA road map, implementing the BTA, working towards WTO entry,liberalising export trading rights for all domestic enterprises and expanding those rights of foreignenterprises, and removing Qualitative Restrictions from 8 imports (including fertilisers and

30 ‘Farm owners labour for increased growth in VN’s agricultural sector’, Viet Nam News, February 17, 200331 ‘Loans put the landless farmers of Tra Vinh back on solid ground’, Viet Nam news, July 26, 200232 See, for example, Fforde and Huan, 200133 ‘The government action program’, Viet Nam News, September 23, 200234 According to personal communication with Brian Doolan, CARE Country Director, January 200335 ‘NA calls on Govt to pick up pace of socio-economic development’, Viet Nam News, December 17 2002; seealso ‘Preferential loans granted to coops’, Viet Nam News, August 3 2002, and ‘HCM city pushes for morefarm coops’, Viet Nam News, August 7 2002

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ceramics). Before the World Bank releases the ‘second tranche’ money, Vietnam also had to removeQRs on another 6 products by early 2003 (cement, steel, glass, paper, vegetable oil, tiles).

The policy of liberalising import/export for private enterprises in all products had been was agreed toby the CPV’s 9th Congress (“to encourage enterprises of all economic sectors to engage in importingand exporting items permitted by law”), whereas the 8th Congress allowed private sector involvementin import/export “under the control and guidance of the State” but defined certain items “the tradingof which is conducted by the state only, or is regulated by quotas.” However, despite this, mostagricultural exports are still controlled by the state in practice due to “stringent regulatoryrequirements”36 and lack of large scale capacity by many private enterprises.

2.2 Gender

The Communist Party of Vietnam has had a long commitment to women’s equality, enshrined inhighly progressive legislation. Its four months’ paid maternity leave leaves many developedcountries behind. Twenty seven percent of national Assembly members are women, the highest inAsia and 9th highest in the world, though women’s representation at commune, district and provinciallevels is lower (14-20 percent). Vietnam has the highest female participation in the labour force inthe region, at 80 per cent, and has preferential policies for women’s employment.37

The initial I-PRSP had little to say on gender, and as noted below (3.2), neither did the World Bank’sCAS, which claimed that special programs aimed at women were unnecessary. However, a NationalPlan of Action was worked on by a number of Vietnamese gender activists in the Women's Unionand the National Committee for the Advancement of Women (NCAW), and their agenda approvedby the government in 1997, including training 16,700 women candidates for commune, district andprovincial People’s Committee elections.

The NCAW put out a new National Plan, approved by the Government in January 2002,38 and itsrecommendations have been partially incorporated into the CPRGS. The WB has given support tothe Government’s Plan, providing “a fund of $50,000 for organizing training courses for localofficers in order to incorporate gender issues effectively in the implementation of the CPRGS.”39 Thenew Marriage and Family Law in 2000 stipulates than the names of both husband and wife must beon land-use certificates, a major NCAW recommendation.

The major gender-related aspects of the CPRGS include ensuring the names of both husband andwife are on land-use certificates by 2005, increasing the participation of women in “all agencies,sectors and enterprises by 3-5 percent by 2010, and establishing a Learning Promotion Fund and settargets for women at different levels in training and disciplines. The CPRGS aims to reducewomen’s overburden in domestic work through investing in small-scale technologies to serve familyneeds in clean water and energy, by greatly expanding the kindergarten and nursery school system,and by “launching campaigns to propagate and educate about family responsibility sharing.” All“prototype prejudice against women” is to be removed from textbooks.

More generally, there are many statements about improving women’s access to education, education,reproductive and family planning services, credit and fighting domestic violence, though strategiesand targets are unclear in the document.

However, organisations in charge of implementing the plan like NCFAW and MARD have limitedcapacity to develop gender-mainstreamed plans due to lack of resources, limited gendermainstreaming technical expertise and the limited linkages with key MARD departments, institutionsand provincial DARDs.40 A further problem is that even the national poverty reduction program

36 Nguyen Van Cam, ‘Business Beat’, Viet Nam News December 16 200237 Truong, 1997 I; Hoa, Sutherland, Thoburn, DFID, 2002, p46.38 Prime Minister’s Decision No.19/2002/QD-TTG39 ‘World Bank economist's efforts recognized in Vietnam's development’, Young People, December 20, 200240 Weisenfeld P., 2002.

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reveals gender bias in implementation. Nearly 70% of its resources have been invested ininfrastructure, where most expenditure for construction was paid for male labour. Although womenare a target group, there is a lack of specific goals, objectives, methodologies and mechanisms tohelp women access the program.41

2.3 NGO comments on the strategy

Three NGO’s, Oxfam GB, Save the Children UK and the World Population Foundation, put out thefollowing major concerns about ‘donor’ strategies and the Government strategies embodied in theCPRGS42:

Pace of trade liberalisation. The social impacts of the programme have not been carried out. Paceand sequencing is needed to ensure that poor and vulnerable equally benefit. Currently a fast pace isbeing encouraged, including rapid WTO entry. Improved market access could aid poverty reductionif linked to strategies for extending opportunities to the poor and over-coming gender-based barriersto market access. Donors need to develop the skills of Vietnamese Government to make appropriateand informed choices about pace and sequencing of liberalisation. The NGO’s advocate Vietnamprotecting its market, subsidising agriculture and maintaining high tariffs. Rapid import liberalisationhas a weak record on poverty reduction.

Export led growth. The poorest and most vulnerable are being left behind as scarce resources arebeing channelled towards export led growth, which the poor are excluded from due to not being ableto access techniques and support services, which they are required to contribute to. So they arebecoming landless and natural resource bases are being exploited unsustainably.

‘Socialisation’ (cost recovery for services through local ‘mobilisation’ of funds) policies for healthand education are inconsistent with pro-poor service delivery. Whatever the intention, it isinterpreted at grass-roots level almost exclusively as charging fees for service. The poor are notconsistently excluded from this policy. One of the most common complaints from poor peopleduring the grass-roots consultation was the burden of health charges (cost of medicines, payments tohealth staff, travel costs) and education charges (tuition fees and non-tuition costs such asconstruction fees, cleaning fees, maintenance fees) on household incomes. Exemptions are notworking.

A WHO research found that cost recovery in the health sector in Vietnam has pushed a further 4% ofthe population (or approximately 3,000,000 people) into poverty43. The new decree on setting up ahealth fund for the poor is likely to face the same kinds of operational difficulties experienced byother social funds: transparency, accountability, stigma/discrimination, eligibility.

In education, while government policy is to increase the proportion of the state budget for educationfrom 15% to 20% (2010), it is also to increase the proportion of the education budget funded bysocialisation 35% in 201044

Decree 10 authorises public service institutions including schools and health centres to raiserevenues and manage expenditure locally, which has the potential to encourage even greaterdemands by these services on the pockets of the poor

Resource allocation. Regions where 64% of the poor live will receive 36% of the Public InvestmentProgram budget, and only 11.5% goes to investment in health and education, whereas 56% goes toindustry, transport and telecommunications.

Public Private Partnerships (PPPs). Donor enthusiasm for in the service sector, and the path toWTO entry and the GATS, raises concerns about how pro-poor will future services be if PPPs areextended beyond banking, insurance, etc to health, education and water. 41 Haspels N., 2000.42 Oxfam GB, Save the Children UK and the World Population Foundation, 200243 Wagstaff, A, 200144 MoET 2002

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Implementation. There are many concerns about the capacity of government to implement theCPRGS. These concerns are raised by the poor themselves during the grass-roots consultations.

Decentralisation. Some of the concerns about implementation stem from the decentralisation ofresource allocation. This assumes a high level of capacity at the grassroots level. In reality, whatcommunes really need does not always match what they receive from provinces, and central agenciesuse only provincial requests when allocating resources. In addition, it is making provinces anddistricts make up deficits of recurrent expenditure, forcing the poor to pay more for services.

Targeting problems. The poorest are often not in practice able to access target poverty programs sothey are excluded from opportunities for vocational training. Access to programs is not consistent,eg, unregistered households cannot benefit. In the poverty consultations, the poor often pointed toincorrect targeting of the poor.

Administrative reform is being implemented without assessment of needs resulting in lessresources at local level. Good governance is not only about improving public administration. Donorsfocus of resources and capacity building at national level will not deliver positive outcomes, moreeffort needs to be made to place resources and training at provincial, district and commune levelswhere the need is greatest.

Special concerns. Much remains to be done for people living with HIV/AIDS in the area of accessto care, especially to drugs and treatment, and it is necessary to dissipate stigma and discrimination,and provide affordable and accessible drugs to all PLWA. Care and support for people living withdisabilities is still weak. Progressive Government laws and policies, such as inclusive education fordisabled children, employment of people with disabilities, and accessibility to buildings andtransportation services, must be adhered to in the implementation of economic development andpoverty reduction loans and grants.

Chapter 3: Rationale for trade and economic liberalisation

3.1 Agriculture

The major assumption is that these measures will promote economic growth, which will lift peopleout of poverty. The World Bank claims that the ‘more globalised’ economies around the world havegrown the fastest and been most successful in reducing poverty, while those which have been slow in‘globalising’ have remained behind.

While therefore Vietnam is included as a ‘globaliser’, the Bank believes Vietnam is not doing it fastenough, as it still has a partly protected and state-controlled economy, and has been slow with tradeliberalisation. By freeing the ‘market’ of all ‘distortions’, economic growth will be more rapid andpeople will set up ‘small and medium’ enterprises, lifting themselves out of poverty.

‘Trade liberalisation’ covers a number of different yet related policy prescriptions. The twofundamental aspects are:

! Abolition of all restrictions on ‘free trade’ between countries, including tariffs, quotas andquantitative restrictions on the import and export of goods, and of all investment restrictions -foreign companies and goods should have exactly the same rights as local counterparts, with ‘nodiscrimination’; this is called ‘national treatment’. If goods and investment flow ‘freely’ aroundthe world, countries will only produce what they can most cheaply, and increased world tradewill boost economic activity and employment

! “Export-oriented growth” is promoted involving countries exploiting their “comparativeadvantage” by exporting what they can produce “efficiently” and cheaply, such as cash crops,and these export earnings can pay for imports of other goods which are more cheaply producedin other countries. ‘Food security’ therefore should not be sought through self-sufficiency instaples, but through having enough cash from export earnings to buy food.

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With respect to agriculture, major policy directions for Vietnam consistent with this framework,advanced by the World Bank in 1998,45 give further rationale in more detail (see above 1.1C).

3.2 Gender

There is little in the literature justifying trade liberalisation which specifically claims to be beneficialto women. A recent evaluation by the World Bank itself found that of over 3000 of its loanagreements, only seven per cent contained references to gender, while another review showed thatgender has been little analysed or targeted at any project stage. Bank and IMF staff “merely include aparagraph or two on gender issues.”46

This may be due to the WB view, pushed in its Women In Development Programme, that 'freemarkets' broadly support the 'empowerment of women' and gender equality', as women's rightsallegedly promote high value and 'efficiency' in production.47

Poor women should have the same rights as men to participate in small business development or toswitch to ‘higher value crops’ for export to lift themselves out of poverty. If women’s specialdifficulties in entering such fields are recognised, it is asserted that they can be addressed byensuring equal access to credit schemes or classes, without it being clear how this can be done.

The World Bank specifically denied women needed special targeting. While the Bank’s CountryAssistance Scheme (CAS) imposed conditions on Vietnam regarding macro-economic policy, theonly clear reference to gender is the following:

“The Bank will seek to implement (the Government’s National Plan of Action for the Advancementof Women) through its projects and by mainstreaming gender issues in our work. While women andgirls in Vietnam may be disadvantaged in a variety of ways, programs targeted to women do notappear to be warranted. Social indicators for women and girls are relatively good and do not showwide gaps in the access of males and females to social services. Hence, our strategy for attaininggender equity will be to try and ensure that women and men benefit equally from all our work ratherthan to have special projects and programs targeted to women and girls.”48

If failure in various inherently risky business schemes falls more heavily on women, leading tomassive debt or landlessness, then women, like other ‘losers’, will be able to find employment in‘small and medium’ businesses set up by those more successful at playing “the laws of the market.”

Newer export oriented industries like garment and footwear employ a high percentage of women,including rural migrants, so this is seen to be particularly beneficial for women. Women losing theirland or driven into debt can migrate to cities to find better paying jobs and achieve a greater measureof independence. If more women than men lost their jobs during the state enterprise ‘restructuring’around 1990, this time men will be more affected as they make up a greater proportion of theworkers in state heavy industry which may be affected by the loss of protection.

In addition, women use services more than men, being responsible for children’s education andhealth care, for bringing water to the household, for cooking and therefore household heating andpower, so they will benefit from ‘more efficient’ services which trade liberalisation and foreigninvestment into the service sector will allegedly bring. Finally, as the main family purchasers,women will allegedly benefit from the cheaper prices of many imported manufactured goodsreplacing expensive locally-produced goods.

45 World Bank, 1998 II46 Gender Action, 200247 Chossudovsky48 World Bank, 1998 I, Point 54

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Chapter 4: Problems with the Rationale

4.1 Agriculture

The World Bank claim that the fastest ‘globalisers’ have also been those which have grown mostrapidly and reduced poverty most markedly could not be further from the truth. Argentina, forexample, was hailed in the 1990’s as a leading free market ‘liberaliser’; now while it producesenough food to feed twice its population, over half the population lives in dire poverty.49 AcrossLatin America, 20 years of complete ‘globalisation’ has led to an average of one per cent growth inGDP per capita over the entire period, and this figure masks the enormous growth in inequality overthat period. According to a US intelligence agency, “poverty is higher today than it was a decade agoin both absolute and percentage terms, and region-wide unemployment is at its highest levels in 20years.”50

The fact that Africa as a whole has been left far behind is widely known, and most African countrieshave been the world’s fastest trade liberalisers.51 The Bank’s assertion is in fact based not on tradeliberalisation policy but on the volume of world trade a country engages in - many east Asian nationsengage in a high volume of trade and many of them have sharply reduced poverty. Yet thosecountries that have reduced poverty most successfully – China, Thailand and Vietnam – have notbeen rapid import liberalisers at all, but quite the opposite.52 And in the case of Thailand and othereast Asian nations (eg Indonesia), it was precisely the level of ‘openness’ to the world economy thatproduced the 1997 crash, resulting in dramatic increases in poverty, further accentuated by the IMFprograms which imposed even more of this ‘openness’.

According to noted activist Walden Bello, “the United Nations Development Program estimates thatunder the WTO regime, in the period 1995 to 2004, the 48 least developed countries will actually beworse off by $600 million a year, with sub-Saharan Africa actually worse off by $1.2 billion!”53 Arecent UNCTAD study covering 124 countries showed that during a period of greater global tradeliberalization from 1965 to 1990, the income share of the richest 20 per cent of the world'spopulation rose from 69 to 83 per cent of total global income.

The fundamental problem with the rationale is that developing countries tend to have ‘comparativeadvantage’ in agricultural products or in some low-wage, low-skilled sections of industry, which sellfor low prices on the world market; developed countries sell more expensive industrial and high techgoods at high prices. Therefore if a developing country cannot protect what industries it does have, ithas to import a greater volume of expensive goods with less money earned from agricultural exports.

Further, the more exports of these agricultural goods are pumped out onto the world market, incompetition with other developing countries, the more the world market is flooded and hence pricescollapse, further reducing the ability of the country to buy imports, while also impoverishing thosefarmers who had been producing that crop.

Vietnam is about to make major cuts in protection of its industries (and agricultural products), but itstrade deficit last year, before the AFTA deadline, reached US$2.77 billion, the highest figure inrecent years.54

Apart from this immense power difference between developed and developing countries, anotherproblem with the rationale for trade liberalisation is the fact that the Agreement on Agriculture(AoA) is stacked against developing countries. By first banning any quantitative restrictions andstate controls, and then slashing tariffs, the weapons that poor countries can afford to use are banned;

49 Marcela Valente, Argentina - Gov't Launches Overdue Attack on Hunger, IPS, November 25, 200250 Stratfor, ‘2003 Annual Forecast War in Iraq: Springboard or Sandbag?’, January 1 200251 Oxfam, Rigged Rules and Double Standards, 200252 ibid.53 Bello, 200154 ‘Vietnam’s exports up 10%, Imports up 18.6% in 2002’, Tuoi Tre, January 2, 2003

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meanwhile, only rich countries can afford to take advantage of the main area of protection allowed,that is, the various categories of state subsidies to producers. Under the AoA, only 25 WTO memberscan subsidise exports. This exclusive club is made up of those countries which had subsidised theirexports prior to the agreement, which not surprisingly are those who could afford it, the US, Japan,the EU, Canada, and Australia. Theoretically, these subsidies must be progressively reduced.

Only those measures with “serious trade distorting effects” — those in the “amber box” in WTOlanguage — are banned by the WTO. Measures with “minimal trade distorting effects” — those inthe “green and blue boxes” — are free from WTO control. However, the dividing line between these“boxes” is simply fudged by the economically powerful countries. Even if some poor countries didgive some minor subsidies, and these were not challenged by the rich countries in WTO courts, suchsmall subsidies would have little chance of competing with the massive subsidies afforded by therich.

Forcing governments to first convert all import quantitative and licensing restrictions to tariffs, evenwhen allowing them some time to reduce tariff levels, emphasises this bias; the false prices of manysubsidised US and EU goods are so low that even high poor country tariffs can be overridden;quantitative restrictions would be more effective.

The US Farm Bill (2001) provides $190 billion in subsidies to US farmers over ten years. Two-thirdsof subsidies go to just 3 per cent of US farmers. Ninety per cent of farm subsidies have gone to justfive crops — corn, wheat, cotton, rice and soybeans — while 60 per cent of US farmers, whoproduce most of the vegetables, nuts, poultry and cattle, are not even eligible for such welfare.55

In the EU, subsidies account for 126-129 per cent of cereal and bovine farmers’ net income, but the40 per cent of farms considered to be ‘small farms’ receive only 8 per cent of the subsidies. This‘Common Agricultural Policy’ eats up nearly half this year’s annual EU budget of 95 billion Euros.56

The recent French-German agreement on agriculture (October 2002) allows EU subsidies to continueuntil 2013. This and the US Farm Bill both make clear that the world which poor countries areentering is not one characterised by some abstract ideal of free trade, but one massively distorted infavour of the rich countries.

Despite corn self-sufficiency, millions of Filipino corn farmers are now exposed to US corn importsselling at half the real cost of production. According to the Belgian prime minister, Guy Verhofstadt,“sugar produced in Europe costs twice as much as sugar produced in South Africa, but it is Europeansugar that is pushing out local sugar in that country. Imported European powdered milk has led to aone third drop in milk production in Jamaica over the past five years.”57

The Agreement on Agriculture (AoA) requires all WTO members to reduce protection from imports.Regarding tariffs, rich countries have been slow to bring them down; in the Uruguay round, theyengaged in “dirty tariffication”, meaning they distorted their “real tariffication” rates and therebyconverted them to relatively high tariffs. By contrast, “the (Vietnamese) government will be underpressure not to follow the example of GATT contracting parties who indulged in ‘dirty’tariffication.”58

The EU overstated its original protection levels by 61 per cent and the US by 44 per cent, which hasresulted in their projected levels in 2000 actually being 63 per cent and 77 per cent higher thanoriginally! Such subsidies were estimated to be more than US$190 billion a year in the handful ofindustrial countries in the late 1980s and US$27 billion in the entire developing world. The formerfigure has increased to US$350 billion a year.59

55 Eva Cheng, Green Left Weekly, May 15, 2002, ‘Huge farm subsidies expose ‘free trade' hypocrisy’56 ‘Aid Groups Claim EU Farm Subsidies Hit Poor Countries’, Viet Nam News, November 1, 200257 Guy Verhofstadt, ‘Hypocrisy behind compassion, says Belgium’s PM’, Viet Nam News, October 19, 200258 Anderson, p3359 Eva Cheng, ‘US, EU bully Third World in trade talks’, Green Left Weekly, December 11, 2002

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Regarding the import restrictions that are allowed under the Sanitary and Phytosanitary Agreement(SPSA) to protect human, animal and plant life and health, “a case would need to be made for eachitem so claimed. Members will scrutinise those cases carefully, and again are likely to apply stricterstandards than currently apply to present WTO members.”60 Thus it will be extremely difficult andcostly for a developing country like Vietnam to invoke this clause, particularly against the US pushfor countries to open up to untested genetically engineered (GM) foods and seeds. According to theBTA, the Parties shall “ensure that any sanitary or phytosanitary measure is applied only to theextent necessary to protect human, animal or plant life or health, is based on scientific principles andis not maintained without sufficient evidence.” This is open to interpretation, with decisions going toWTO litigation; the US does not regard international concerns about GM foods to be based on“scientific principles” or “sufficient evidence”.

In contrast, SPSA has emerged as a major protectionist weapon for rich countries. For example, theEU invokes these standards to ban import of milk not from cows which have been mechanicallymilked. Most developing country smallholders milk cows by hand.61

The final weapon of the rich are the WTO’s “anti-dumping laws”. Of course, poor countries can usethem in theory as well, but as always, are in a far weaker position to win. Notably, the US launched79 WTO-allowed “anti-dumping” investigations in 2001, more than any other WTO member.62

4.2 GenderThe fact that the World Bank’s CAS saw little difference in men’s and women’s social indicatorsand access to social services does reflect the fact that the position of Vietnamese women is relativelygood compared to many other developing countries. This is largely a legacy of its socialist past withits strong ideological commitment to women’s equality.63

It is therefore assumed that women are in a relatively good position to withstand the morecompetitive environment of trade liberalisation, in the context of the view that falsely assumes freeand fair market competition between men and women. In reality they start from different socio-economic and cultural positions,64 and a degree of women’s inequality at many levels has lingered,despite the Government’s efforts. As noted in a critique of World Bank policies, “treatingcommunities and households as single units can overestimate women’s well-being, since communityand household distribution often favours men. It is important to disaggregate poverty effects bygender.”65

Further, this view also ignores the fact that women’s position has in certain respects declined sincethe onset of the Doi Moi economic liberalisation program in the late 1980’s. The market economygenerates and sharpens problems of male-female and gender inequality, further widening the gapbetween the rich and the poor, between men and women.66

Under doi moi, constraints to women’s production and reproduction capacity have been caused bymany socio-economic and cultural factors, resulting in the (a) change in access to resources andemployment opportunities, (b) change in access to public services and (c) change in women’sposition in the occupation structure.67

The initial erosion of women’s social position coincides with the shift from a state-cooperativesponsored to a household-based productive and reproductive strategy under the household contract

60 Anderson p 3461 Centre for Food Economics Research, 200062 Eva Cheng, Green Left Weekly, May 15, 2002, ‘Huge farm subsidies expose ‘free trade' hypocrisy’63 Strong evidence can be found in Anh and Hung, 2000 and Truong 1997 I.64 Truong, 1997 I65 Gender Action, 2002.66 Anh and Hung, 200067 Truong, 1997 I

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system.68 Women were the main bearers of burdens that the shift of the policy transfers onto theirfamilies, entrenched with the collapse of the cooperatives from 1989. Their work became moreintense and invisible and old patterns of patriarchal control over women’s labour re-emerged. Femalelabour in agriculture rose from 75.6 percent of all female labour in 1989 to 79.9 percent in 1992,while the male equivalent changed little.69 Such intensification is also due to the growing rate ofmale migration to find paid city employment.

Some of the clearest post-Doi Moi differences include70:

! Average female-operated farms cultivate only half the land area of male-operated farms, andfarm profits are only 62 percent.

! Female-operated non-farm rural enterprises are on average much smaller, about one-eighth aslikely to employ wage workers than male businesses

! Women’s waged employment increased by 4 percent between 1993 and 1998, but the increasewas 9 percent for men

! The average hourly wage for women is 78 percent that of men, with the biggest differencesamong those with lowest educational levels (this however should be seen in the context that inmost developed countries, the male/female wage gap is considerably wider)

! The number of girls dropping out of lower secondary school is 6 percentage points more thanboys, and 11 points more in upper secondary school

! While there is no gender gap for people with no more than primary education among 22-34 yearolds (ie those attending primary school in the 1970’s and 1980’s), this gap has widened markedlysince the onset of Doi Moi

! Child malnutrition rates are significantly higher among girls than boys

! Only 65 percent of girls who are ill accessed health care professionals, when the mother had noeducation, but this jumps to 88 percent when she had 4 years of education (the father’seducational level has little impact on either female or male children)

! The percentage of women giving birth without skilled medical professionals is about 12 percentoverall, but around 30 percent for the poorest women, women with no education and ethnicminority women

! Paid maternity leave for state sector workers was cut from 6 months to 4 months, and in ruralareas most creches collapsed with the end of the cooperatives

! Women’s representation in the National Assembly collapsed from 32 percent in 1975 to 17-18percent over 1987-97, but increased again to 26-27 percent since then. Women’s representationat Province/District/Commune levels fell from 28/19/19 percent in the 1980’s to 12/12/13percent in the early 1990’s, rising again to 20/18/14 percent in the late 1990’s71

Women’s largely unrecognised and unremunerated reproductive and domestic responsibilities, alongwith intensified informal household production, greatly limit their mobility. The perception that thisis their primary function, due to the prevalence of traditionalist ideology in rural areas, reinforcesstructural barriers to women’s full participation in social, political and cultural life.72

These limitations strongly impede their ability to compete with men in the market, when everyindividual competes with every other on a non-level ‘level playing field’, unless they find laboursubstitutes for housework and child care. When they do, such substitutes involve other women and

68 ibid.69 Anh and Hung, 200070 FAO/UNDP, 200271 Anh and Hung, 2000, p173-7572 EU Women’s Lobby website

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female children – perhaps taking them out of school early. This problem of women’s role inmaintenance of the labour force is overlooked by macro-economic policy.73

As a result, with everything now on the market, women are denied access to land, resources, credit,and the ability to mobilise labour.74 Women in rural areas face more significant barriers, includinglow levels of education and work skills, heavy domestic responsibilities, inferior legal status, andentrenched sex discrimination both formally and informally. Most policy formulation andenforcement have neglected the gender aspect, particularly in areas such as land allocation, land userights, investment, loans, extension services and techno-transfer.75 This both results from andintensifies the lesser representation of women in decision making process.76

That women’s position has weakened due to domestic economic liberalisation suggests that it islikely to weaken even further as the scale of this ‘free market’ competition is widened to the wholeworld rather than mainly the domestic market – the same factors will be at play on a far higher level.Moreover, the fact that we are entering this new period with women already in an inferior positionmeans they are at a lower starting point, relative to men, compared to their position when Doi Moibegan in the late 1980’s.

The gender-differentiated division of labour in agricultural activities also means that numerousopportunities for enhancing production capacity (eg small business development or switching to‘higher value crops’) are limited for women.77 Their farms are smaller, their businesses are smaller-scale and more bound to petty trading activities in local markets,78 involving drastically long hourswith no social benefits.

To rise to the level of registered ‘small and medium enterprises’ or large-scale cash cropping in the‘farm economy’, and larger scale trade over a wider area, particularly for export, one needs moreland, greater capital, specialised training, higher educational levels and greater mobility, all of whichfavour men.79

It is unlikely that even the petty business sector where women predominate will grow – the hugegrowth of this sector in the 1990’s was one-off, and it is now glutted. With global tradeliberalisation, larger scale will be even more necessary to apply better technology, ensure requiredquality standards and export with significant volume, favouring more the bigger ‘medium’ than thesmaller ‘small’enterprises. Such concentration may have the opposite effect to the huge expansion ofthe household sector of the early 1990s.

In fact, modernisation of agriculture through technological inputs, required to maximize theircapacity in production, and compete to the agricultural imports in quality and price, will drasticallyaffect employment opportunities for women farm workers. Women are far more likely to work asseasonal farm labourers, with unstable earnings, than are men.80 Therefore, new cash croppingbusinesses replacing farmers’ traditional self sufficient employment generally does not make up forjob losses or provide the levels of rural employment needed. Continued reallocation of resourcesaway from informal agriculture in favor of international trading activity is likely to have adevastating impact on women.

Current training is not aimed at the needs of women. Extension services tend to reach men and areoften used to introduce new technological developments, which are often not viable for poor farmersand particular for female headed households, who are disadvantaged regarding affordability of

73 Truong, 1997 I74 FAO, 200175 Binh and Lan, 1996.76 Sultana and Nga, 2002, p19877 Binh and Lan, 199678 FAO/UNDP, 200279 Truong, 1997 I80 ibid.

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extensive inputs.81 Agricultural extension officials in Tra Vinh have also expressed the fear thatpublic administrative reform will mean fewer services at the grassroots level rather than more.82

Women’s farms thus will be at a disadvantage to compete on the export market, or on the domesticmarket without protection from cheap agricultural imports, as subsidies are cut under tradeliberalisation, and capital, credit, land, labour, education and access to information and technologygo more to certain groups of men. Therefore, poor and female farmers, especially in mountainousand remote areas less favourable for food production, permanently threatened by hunger, will facemany more difficulties.83

This forces women to migrate to find employment where they compete with other women for lowpaid, exploitative positions in urban areas on a temporary, seasonal or permanent basis (see 8.1). Thepredominance of women in these export industries like garment, and the fact that men will be moreaffected by lay-offs in state heavy industry affected by loss of protection, has even been put forwardas a net ‘gain’ for women from trade liberalisation.

However, women’s domestic role often means that only young unmarried women can migrate; ifmothers migrate, their role needs to be filled by a girl child leaving school. The exploitative andunstable wages and conditions often do not allow women any real independence.

Further, such attempts to treat men and women as different social classes, ignoring the macro-economic framework driving both into poverty, is just as misplaced as the opposite view noted abovethat women do not need any special targeting. In fact, men often react to unemployment not bytaking on women’s domestic chores, but by domestic violence, alcoholism, gambling etc, puttinghuge pressure on women.84 This group of displaced men are the most likely to engage in high riskactivities leading to the current rapid spread of HIV infection, which naturally their families as well.

The assertion that through import liberalisation will benefit women with low import prices foragricultural inputs or consumer goods, is dealt with below (see 5.9 and 8). In any case, they will notreceive much benefit if the same import liberalisation also lowers the prices of their crops.

Finally, women use services more than men, so it is often therefore stated that they will benefit from‘more efficient’ services which trade liberalisation and the entry of foreign investors into the servicesector will allegedly bring (see Chapter 7). Such services may benefit middle and upper classwomen, but the poor will have less access as the cost of services goes to market.

Chapter 5: Review of major issues of trade liberalisation in agriculture

5.1 Food Security, export cash crops and diversification

The philosophy of “export-oriented growth” has been promoted as the route for developing countriesto develop and escape from poverty. This is supposed to involve countries exploiting their“comparative advantage” by exporting what they can produce “efficiently” and cheaply andimporting other things. This tends to stress reliance on developing cash crops for export, even at theexpense of food crops and the local market, as food can then be bought locally or imported using thecash gained from exports.

While the rhetoric of “agricultural diversification” is often used, in practice this does not meansupplementing rice monocultures with more diverse food crops, but substituting cash-crop, includingnon-food, monocultures for both rice monocultures and traditional, more diverse agriculturalpractices of many farmers, especially ethnic minorities.

81 Anh,1999:10782 Oxfam, 200283 Oxfam 200284 Gender Action, 2002

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As the WB puts it, “restrictions on alternative uses of paddy land” should be removed, as they“inhibit diversification into higher valued crops.” Instead, “agricultural diversification should beallowed to proceed as farmers freely responded to changes in market prices and unbiased incentives… a better approach to food security is to allow openness in consumption, production, stock holding,and trade and investment regimes, thereby allowing full expression of comparative advantage togenerate the economic wealth that can lead to true self-sufficiency.”85

This downplays the emphasis Vietnam has laid on staple food self-sufficiency. In the past thegovernment has imposed restrictions on alternative uses for paddy land for this reason. Sometimeslocal governments are still unwilling to turn over paddy land to other uses if they believe it willthreaten the food security. There may be times when the assessment is mistaken, but the intention issound.

The implication that the government wants to grow nothing but rice is absurd. The ‘Garden-Pond-Pigsty’ (VAC) model of sustainable diverse agriculture has been pushed in Vietnam since the1960’s. The ‘Five Year Plan for Socio-Economic Development at the VCP 8th National Congress in1996 calls for “ensuring national food security for any contingency, increasing rapidly supplies offood (ie rice), vegetables and fruit … expanding areas under industrial crops and fruit trees,increasing rapidly the cattle and poultry stock, to develop marine and aquatic production.”86

Does such diversification necessitate abandoning a commitment to food security? For thegovernment, the stipulation is “to promulgate concrete regulations allowing the change of land usepurposes on the basis of respecting planning and ensuring food security.”87

In fact, most Vietnamese experts agree with the government on this. Doctor Luong Thi Minh Sam,Deputy Director of the Institute of Social Sciences in HCM City, claims that “Vietnamese farmerswill be the most vulnerable people during the economic integration process. The small-scaleproduction of Vietnam’s farms will have to compete with large-scale agricultural industries in theUS, EU and Canada. However, if farming becomes unprofitable, Vietnamese farmers might quit thepaddy fields to seek other jobs with better pay, thus endangering world food security.”88

Similarly, eminent Professor Nguyen Van Luat noted that “apart from being the country’s biggestrice granary, the (Mekong) delta also produces about 60 per cent of Viet Nam’s seafood. Farmersalso grow other crops such as white sesame seeds, soybean, maize, sugarcane, cotton, fruit and raiselivestock such as ducks. It is also the source of traditional medicinal herbs that are used to treatserious illnesses such as cancer, heart disease and asthma. Of course, rice is still the delta’s strongpoint and ensures food security and sustainable development.”89

The issue thus is that the World Bank and the trade liberalisation agenda oppose the government’sright to impose any restrictions in order to guarantee basic security in staple foods; the rhetoric aboutfarmers “freely responding to market changes” and allowing “full expression of comparativeadvantage” clearly oppose the right of the state to in any way interfere with individual farmersblindly acting in response to “market forces”. In other words, if farmers can get a better price forcoffee or shrimp, for example, they should respond to this “market incentive” and then they can buyfood with the money they make. In any case, trade liberalisation makes this inevitable – with theneed for ‘efficiency’ in production to earn fast export dollars to pay for rapidly expanding imports,concerns such as ‘food security’ merely get in the way of a good cash crop.

In reality, over-reliance on cash crops has been conclusively proven to be catastrophic for foodsecurity. The major problems include crashing world prices for virtually all export products(especially with bumper crops), fake ‘dumping’ challenges from rich countries, challenges todomestic-oriented crops from dumped imports from rich countries, and environmental degradation 85 World Bank, 1998 II86 Vietnamese Communist Party, 199687 ibid, p19588 ‘Food security remains a prime concern: regional researchers’, Viet Nam News September 1689 ‘Improving rice strains will boost living standards for farmers: scientist’, Viet Nam News Oct 18

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due to intensification and mono-cropping. The country thus will thus not be able to pay for hugelyincreased manufactured and agricultural imports expected under trade liberalisation, even if exportcropping is intensified to truly unsustainable proportions. Crashing prices means small farmersgiving over their fields to cash crops end up with neither food nor money to buy it with. The need fortechnology for post-harvest and for quality improvement demanded by rich country markets, as wellas the ‘economies of scale’ requirements of most cash crops, further excludes or drives into debt andlandlessness small operators, resulting in further land concentration.

5.2 Export crop price crashes

5.2A Coffee price crashAccording to the MARD report on coffee, “trade liberalisation has created a “great shock” in theCentral Highlands in economic, cultural and environmental terms. Foreign companies purchasingcoffee from Viet Nam and then selling to international markets reap the greatest benefit, while poorfarmers and other groups such as women and ethnic minorities reap the lowest.”90

As the report points out, the huge response of hundreds of thousands of peasants, both indigenous tothe Central Highlands and the free immigrants from elsewhere, was a mass response to “marketsignals,” that is, the big rise in the world coffee price in the early 1990s. This great success of the“market” and of Vietnam’s new export cash crop was heralded by everyone from the World Bank tomany of its critics.91

This great expansion of so-called ‘diversification’ into coffee monocrop was often at the expense offar more diverse traditional agricultural systems among the local ethnic minorities of the CentralHighlands; moreover, it clearly benefited those with the resources to put into larger plantations, withmany ethnic minority people cheated into selling their land for what they thought were good prices,ending up with no means of livelihood and having to work on the largely Kinh-owned plantations.

Inevitably, the world price crashed, due both to oversupply on the world market caused directly bythis “export-oriented” globalisation in all the coffee producing countries, and the enormousmonopoly of the international TNC coffee marketing cartel. For countless thousands of smallfarmers, who put all their land into coffee production, the result is hunger “for many months of theyear” according to MARD, only slightly mitigated by patchy government welfare.

Not surprisingly, the report notes that “diversified households in favourable coffee-growing areaswith sufficient capital and Government support have suffered serious losses but have passed throughthe crisis,” where “having sufficient capital” to be able to diversity, or having sufficient land to havemaintained some diversity as insurance, in a word, being rich, is the key point.

By contrast, “small coffee monoculture households in less favourable coffee-growing areas havebeen disadvantaged and cannot return to their former self-sufficient production patterns; many areheavily indebted, and some do not even have enough food … In the past they were sufficient of rice,but they now lack rice or have to eat cassava. Local residents have had to grow cassava since 2000”.

While rich households actively destroy their coffee trees, middle-off and poor households “strugglein hopeless conditions and passively abandon their coffee crops.” Unlike the rich households, theydo not even have the money to destroy their coffee crops to plant food. It goes without saying thatwhen the “world market” price is below the cost of production, farmers cannot buy food, from thelocal or the world market, and the essence of trade liberalisation ideology collapses like a house ofsand.

90 ICARD, 200291 “In general, we consider it to be a huge success”, Don Mitchell, Economist, World Bank, quoted fromGreenfield, 2001; Fforde, 2002, talks of the “extremely good responsiveness to market signals”, but later grantsit may have been “too responsive”, p367, 376.

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Does not the disaster call into question the view that the government should not in any circumstancesset aside land for food security or in other ways tamper with “free market” uses of land?

The Lam Ha district committee in Lam Dong Province certainly thought so. District secretaryNguyen Quoc Trieu claims that “if the district had not planted the seeds of economic diversificationearlier, it would now be harvesting despair like the rest of the highlands.” The district had set aside35,000ha for coffee plantations, but also reserved 2,600ha for mulberries, 500ha for tea and a largearea for rice and other subsidiary crops.

This meant every household in the district could diversify their crops and plant any combination ofcoffee, tea, mulberries and rice. “Lam Ha continues to persuade every household to set aside a stablearea of land for the cultivation of coffee, tea and mulberries, so they are less affected when coffeeprices fall,” said Van Thao, chairman of the district People’s Committee. Last year, the districtharvested 18,543 tons of rice and 6,333 tons of corn, which ensured the locals had food security.92

5.2B Price crashes of other export cropsReliance on earnings from cash crop exports are further undermined by the fact that virtually everycrop has suffered recent price falls on the ‘world market’.

Pepper has seen annual growth of 25 per cent over last five years, exports rising from 7000 tons in1996 to 71,000 in first 10 months of 2002. Vietnam is now the world’s largest exporter of blackpepper, and the second largest producer after India. However, world pepper supply rose to 250,000-300,000 tons a year, while import demand is 180-200,000 tons, resulting in a sharp drop in worldpepper prices from $3000 to $2000 a ton in 200293 and now down to $1235 per ton. In 2000, pepperearned $120 million from sale of 35,000 tons, while in 2001, exports of 53,000 tons earned only $89million.

Cashews - Vietnam is the third largest cashew exporter in the world. Ninety percent of cashewproduced is for export. However, “revenues are likely to fall 20 per cent to US$120 million whiletonnage increases by a marginal 2.4 per cent,” MARD reports. “Plunging demand on world markets”meant that by September 2002, prices had crashed from $5,700 per tonne to $3,700, costing cashewexporters an estimated $30 million last year.94

Silk - In recent years, Vietnam has earmarked 25,000ha for mulberry zones, with direct statecontracts with farmers and high levels of input subsidies creating thousands of jobs in rural andmountainous areas, in farming and craft villages. However, world silk prices fell 40 per cent in 2001-2, and have been falling since 1994, and Vietnamese productivity is 30-40 percent lower thanChinese varieties, leading to enterprises undercutting each other.95 The jobs affected by these pricecrashes and potential import surge with trade liberalisation are above all women’s jobs.

Tea – Vietnam has 100,000 hectares of tea plants, producing 93,000 tons of tea, 0f which 80 percentis exported. Tea prices dropped from $1536 per ton in 1995 to $1100 in 2001.96

Shrimp - Fierce competition, reduced purchasing power due to the international recession and“increased supply from European countries have reduced world shrimp prices by between 20 and 30per cent”97. While the country’s shrimp exports rose by 10.7 per cent in the first half of 2002, thevalue of these exports rose only 4.4 per cent. More than two thirds of shrimp farms in Tuy Phongdistrict in Binh Thuan province have stopped operating, “due to a decline in shrimp prices andshortage of breeding shrimp.”98

92 ‘District rides high despite coffee’s dive’, Viet Nam News, April 23 2002,93 ‘Pepper industry needs to spice up its act’, Viet Nam News November 11 200294 ‘Cashew price slump hurts exporters’, Agroviet News 17/12/0295 ‘Grassroots sericulture needs help to recover from world silk crisis’, Viet Nam News, Oct 12 200296 ‘Tea exports take a tumble as Iraq conflict brews’, Vietnam Investment Review, Feb 24 – March 2 200397 ‘Fisheries sector enters rough waters with tough export targets ahead’, Viet Nam News, July 6, 200298 ‘Shrimp breeders stop work’, Viet Nam News, August 24, 2002

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Fruit - Litchi farmers Bac Giang are now selling their fruit for 4,000 dong per kilo – down from20,000 in 1995. Average-quality longans now sell for between 800 and 1,300 dong per kg, three orfour times lower than they were last year (see 5.7)

5.3 Import surges destroying local agriculture

5.3A Maize and SoybeansMaize and soybeans are two crops which can be seen as both food crops and cash crops and whichhave experienced considerable growth in recent years. The animal feed industry is particularlydependent on maize and soybeans, so developing such crops can be seen as having strong economiclinkages, to this industry and to the livestock industry itself, while also providing back-up foodsecurity if their prices collapse or if rice is short.

At this stage, Vietnam’s animal feed industry still imports 60 per cent of its raw materials, mostlymaize and soybeans. Vietnam grows 120,000 tons of soybeans, but needs 800,000 tons annually. Thecattle-feed industry currently imports between 300,000 and 600,000 tons of maize per annum.Average freight costs are $200 a tonne.

MARD has decided to enlarge the country’s area of maize to 1.2 million ha by 2005, from thecurrent level of about 700,000ha, half of which is in the northern mountains region, alongside theRed River Delta, the north central coast and the southeast. It is hoped the plan will double the annualmaize harvest to between 4 million and 4.8 million tons by 2005. The plan also includes 7,400ha ofmaize nurseries, producing hybrid seeds for 85 per cent of all maize-growing areas.99 In someregions, expanding maize crops have had a pronounced poverty-reducing effect.100

The question is, what happens to these thousands of small farmers under trade liberalisation?According to noted Professor Vo Tong Xuan from An Giang University, they will be wiped out.“When US maize and soybean arrive in Viet Nam under the Bilateral Trade Agreement, locals willno longer sell their commodities at such high prices because they will be too high in comparison withUS prices.101

He pointed out that “the US is the world’s biggest soybean exporter, commanding 54 per cent of theinternational market in 2000. Its soybean output has increased from 55 million tons per year since1995, to 70 million tons per year in 2001, according to the US Department of Agriculture. Theincrease in volume has driven down its price.” Moreover, due to massive US export subsidies, “USsoybean exports cost VND3,060 per kg compared to Vietnam’s VND6,000-7,000 per kilogram.”

The US is also the world’s largest maize exporter, the 2000-01 crop making up about 41 per cent ofthe total world output. US maize costs “VND1,450 per kg compared with Vietnamese maize atVND1,800 per kg.” He also noted that “US Government subsidies mean that American agriculturalproducts such as meat, eggs, and dairy products are also cheaper than local items.”

Under the BTA, import tariffs on soybeans would drop from 10 to 5 per cent. While tariffs on maizewould remain at 10 per cent for the first three years, even this will not nearly cover for the pricedifference due to US subsidies. No other means of protection are allowed, with all qualitativerestrictions and import and distribution licensing restrictions also to be scrapped within 3-5 years.This not only means the subsidised imports would be cheaper, but that US TNC’s could set up theirown import and distribution networks for their products in Vietnam, with no restriction on theamount imported.

99 ‘Maize growers plan to edge out imported rivals with bumper crop’, Viet Nam News May 11, 2002100 ‘Escaping the maize of poverty’, Viet Nam News, January 18, 2003. Farmers in Son La’s Co Noi communeare said to be earning an average income of $228 a month from maize production.101 ‘Expert turns accusations of price dumping back on the United States’ Viet Nam News August 21, 2002

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5.3B CottonA similar disaster, due to the “world market price’, threatens Vietnam’s cotton farmers. MARD hasdrawn up a plan to develop the nation’s cotton industry, to enable the domestic cotton industry tomeet about 70 per cent of domestic textile and garment enterprises’ raw cotton needs instead of just12 per cent at present. Currently, the industry imports $100 million worth of materials each year,reducing its competitiveness. The plan’s annual target is 180,000 tons of raw cotton on an estimated230,000ha by 2010, creating employment for 400,000 local farmers.102 The country’s last cotton cropproduced 32,530 tons of cotton seed, a 60 per cent increase over the previous crop’s levels.

The plan also involves the construction of 10 more cotton processing factories, each producing20,000 tons of cotton a year, and another five to extract oil from cotton seeds, located in Vietnam’sfour main cotton growing regions. The main regions are the Mekong Delta, the Central Highlands,the north and south central coast and the northern mountains.

While a “cash crop”, cotton is not being grown as an export crop. As it feeds into the domestic textileand garment industries, which sell on the domestic market and account for a very large share ofexports, cotton growing can be considered a crop with strong linkages into national economicstrategy. “Cotton growing has played an important role in poverty eradication in remote areas, as thecurrent cotton purchasing price is VND5,500 per kg.”103

However, this poverty reduction strategy has suddenly began unraveling as “world cotton priceshave abruptly fallen to their lowest level in 26 years. Raw cotton is presently fetching aboutUS$0.85-0.90 on the world market, compared to about $1.30-1.50 in June last year. On the domesticmarket, locally grown cotton is selling for about VND16,500 ($1.10) per kg, or VND3,000 morethan imports.”104 The Viet Nam Cotton Company (VNCC) warned that falling global prices willhave drastic effects on domestic cotton farms and the entire garment industry, with cheap importsflooding the Vietnamese market, making it difficult for local growers to sell their cotton.

It is first of all important to note the cause of this magical “drop in the world market price.” In fact,the glut is due to the US subsidy program, which means many US cotton farmers “will receive halfof their income from the government this year.” Although a relatively small share of the farmpopulation – just 25,000 of America’s 2 million farmers actually raise cotton – their affluence andinfluence is legendary in Washington. The average net worth of a full-time American cotton-farminghousehold, including land and non-farm assets, is about $800,000, according to the US department ofAgriculture.”105

Last year, with $3.4 billion in subsidies, US cotton farmers aggravated the cotton glut by harvestinga record 9.74 billion pounds of cotton, “pushing prices far below the break-even point of mostgrowers around the world.”

The garment sector “has already taken advantage of these low prices, importing 115,000 tons of rawcotton for just $113 million.” However, Nguyen Huu Binh, general director of VNCC and deputygeneral director of the Viet Nam Garment and Textile Corporation (Vinatex), said “the company haspromised to protect cotton farmers from losses and will honour all of its contracts. The company hadsigned contracts with farmers in order to boost the area of stable cotton cultivation around thecountry.”106

These two statements from the same article seem contradictory. Most likely, VNCC, being a statecompany, has to fulfil its social obligations to the farmers, while the private garment companies,whose sole motivation is profit, naturally import cheaper cotton from overseas. Hence private

102 ‘Govt pumps capital into cotton farms’, Viet Nam News June 11, 2002103 ‘Vietnamese farmers have a boll with new cotton growing incentives’, Viet Nam News September 13, 2002104 ‘Cotton growers fret as prices plummet’, Viet Nam News May 27, 2002105 Thurow and Kilman, 2002106 ‘Cotton growers fret as prices plummet’, Viet Nam News May 27, 2002

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enterprises can then be called “more efficient” and state enterprises can be called “a costly burden”,to dredge up classic neo-liberal speech.

Which then raises an important question about the role of state and private companies in povertyalleviation. If the ‘world market’ rules, many thousands of cotton farmers, and workers in processingplants, lose their livelihoods.

However, an article a month or so later seemed to indicate that the (also state) garment company haditself reneged on an agreement with the state cotton company: “The Viet Nam Textile and GarmentCompany (Vinatex), for instance, planned to buy 8,000 tons of cotton from the Viet Nam CottonCompany (VNCC). However, it changed its mind, citing cheaper import prices.”107 This thusindicates the impact of the ‘world market’ on SOE social obligations, if left at that.

“VNCC officials said it has only sold 3,000 tons of its 8,000 tonne target, and now has a 7,000 tonnestockpile.” Present methods are only enough to preserve the cotton stockpile for three months. Thecompany “has attempted to move the stockpile by reducing prices to VND15,150 per kg, creatinghuge losses for itself.”

VNCC is calling for more state intervention to help shift this stockpile, and “asked the Governmentto provide 30 per cent of its working capital to ensure it remains operational,” as well as establishing“a long-term bail-out fund for the cotton industry, a high-risk crop, to help it weather the pricecrisis.”108 They have also urged the government to subsidise cotton farmers and, “under thedevelopment strategy, they want a closer control over investments, especially into SOEs, to avoidoverlapping.”109

It should be emphasised that all these measures, eminently logical from the point of view both ofhelping the cotton farmers pull through this crisis and prevent them falling into poverty and debt, andof the long-term promotion of an industry with linkages throughout the economy, are all illegal fromthe point of view of full-scale trade and economic liberalisation. According to the September 13 VietNam News, the government is now fulfilling its social obligations and subsidising farmers’ sellingprices to keep them at a floor price of VND15,500 per kg.”110

The U.S. is second in world cotton production only to China and the largestsubsidizer of cotton. After China and the U.S., India, Pakistan and Uzbekistanround out the list of top world cotton producers in 2002.

5.3C Other challengesSugar. The sugar industry underwent a huge expansion in the 1990’s when prices were high. Whilethere are certainly many criticisms that can be made of the way this occurred (which there is no roomfor here), the problem now is the crash of world prices brought about by massive EU exportsubsidies. Prices crashed from 25 c to 15 c a kilo in 1997-99. Sensibly, Vietnam currently bansimports, as an import surge would destroy large numbers of livelihoods of workers and farmers, butthis ban has to be lifted in several years in accordance with trade liberalisation schedules. The sugarindustry directly employs 17,000 rural workers plus several thousand labourers involved intransporting sugar.111

Salt. In 2002, the price of salt dropped to below 150 Dong per kilo, from 350 Dong in previousyears, due to a lack of regulations on imports, according to Viet Nam Salt Corporation (VSC)Director Nguyen Gia Hung. The Government maintained a floor price of 330 Dong.112 Salt farmingkeeps 70,000 of Vietnam’s poorest people employed. 107 ‘Garment industry urged to shape up’, Viet Nam News July 30, 2002108 ‘Cotton growers fret as prices plummet’, Viet Nam News May 27, 2002109 ‘Garment industry urged to shape up’, Viet Nam News July 30, 2002110 ‘Vietnamese farmers have a boll with new cotton growing incentives’, Viet Nam News September 13, 2002111 MARD/ISG, 2002112 ‘Salt imports flood local market’, Viet Nam News, April 4 2002

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5.4 Fruit: Price crashes threaten export value and import surge

Fruit producers in Vietnam fall into three main categories – small scale farmers without traderegistration who produce for nearby markets, large scale private fruit producers who transport theirfruit across the country and to foreign markets, and state owned companies that concentrate on fruitand vegetable processing.

Total exports of Vietnamese fruits was $300 million last year, up from $50 million in 1995.Important fruits include litchi, longan, pineapple, watermelons, oranges, mangos, dragon fruit andgrapefruit. There are 335,000ha of orchards in the Mekong Delta, providing more than 4 million tonsof fruit per year.

While some are gaining from growing fruit instead of or as well as staples, and while increasing fruitand vegetable growth certainly boosts the nutritional levels of Vietnamese, the pressures ofglobalisation, export orientation and large scale fruit monoculture gardens are causing a number ofproblems for this strategy.

Global prices are not stable, and prices for many fruits have been falling. On the other hand, thedropping of tariff barriers in early 2003 due to AFTA will confront Vietnamese fruit growers with aflood of lower priced fruit from neighbouring countries. According to Nguyen Ngoc Lieu, the deputydirector of the Southern Fruit Trees Institute, Mekong fruit such as mangoes, grapefruit, dragon fruit,mangosteens, and longans will face stiff competition from the same fruit grown in regional countries.If fruit farming is not “modernised and streamlined”, Vietnamese fruit exports “will flop” when thecountry joins AFTA, according to experts from the Institute.

While much is made of the “quality” of fruit, Nguyen Van Ky, general secretary of the VietnameseFruit Farmers Association, claims that Vietnamese fruit is better than the same fruit grown inThailand. However, to be successful, Vietnamese fruit needs to be free of bugs and scratches, tasty,clear of insecticide and fertiliser residues and cheaper than Thai fruit, Ky said. To be eligible forexport, fruit must meet “stringent requirements on appearance, flavour, cost and stability of supply.”

The lower prices of imported fruit is due to their greater productivity. Vietnam’s average fruitproductivity is 9 tons per hectare, compared to the world average of 30-35 tons. Mangoes andbananas, for example, sell for $300 and $100 per ton in Vietnam, compared with $65 and $50 a tonin Thailand. The other main problem is lack of good post-harvest storage technology – the post-harvest spoilage rate is about 30 per cent. As for processing, while there are 40 processing plantswith a total capacity of 100,000 tons annually, their technology remains at low levels. The use ofwhat are considered to be “unidentified and sub-standard fruit trees” is a further reason “for poorfruit harvests and low-quality produce that falls short of market demands, particularly overseas.”

To be both free of ‘bugs and scratches’ and free of insecticide residue can be a big ask for poorfarmers with limited farm technology. The pressure to boost productivity and for fruit to “look good”to foreign consumers leads to the use of more ‘high-tech’ growing methods and intensification, andtherefore the greater use of chemical fertilisers and pesticides, with serious consequences for humanhealth and the environment. However, this leads to further barriers from richer countries who willnot buy fruit that has been chemically damaged.

Yet to afford the investment capital to both shift to fruit trees and intensify production while havingthe technology to do with without large chemical inputs, and the knowledge regarding correct levelsof inputs, with falling world prices, tends to restrict the winners in this business to a smaller circle. Inorder to try to stay afloat, smaller farmers may be tempted to use even more chemicals in the hope ofboosting yields.

This suggests that fruit farming for export is unlikely to be a way out for many poor farmers, unlessorganised into cooperatives, through which they could pool resources, improve harvest and post-harvest technology, collectively bargain for better prices, maintain some areas for food security andavoid all competing against each other and driving down prices. The government should “reducetaxes on fruit cooperatives, or they will not be able to save capital to keep a firm foothold in this

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market-oriented economy’” according to Tran Minh Tan, Chairman of Tan Truong Cooperative inBinh Duong.113

The examples of longan and litchi are instructive. Both have had bumper crops, as individual farmers‘intensify’ production due to ‘market signals’, and in both cases the prices have crashed. Litchifarmers of Luc Ngan district in Bac Giang, a major litchi centre, are now selling their fruit for 4,000dong per kilo – down from 20,000 in 1995. They are becoming increasingly bogged down in debts,owing banks about 240 billion dong. About 30 per cent of the litchi crop is exported. NorthernVietnam’s litchi competes with the south’s longan and Thai-grown longan which enter Vietnam onthe way to export in China.

There are 43,000ha of longan farms in the Mekong Delta provinces of Vinh Long, Dong Thap, TienGiang and Can Tho. The highest price the farmers can fetch for their best-quality longan is 1,700dong per kg, while average-quality longans sell for between 800 and 1,300 dong per kg, three or fourtimes lower than they were last year. “Longan is the mainstay of our commune, and accounts for 80per cent of our cultivated land,” said Ho Ngoc Phuoc, deputy chairman of An Binh Commune’sPeople’s Committee in Dong Thap. “The falling price of the fruit will push thousands of people intodifficulty and about 25 billion dong worth of loans will become bad debts,” he said.

Despite the rhetoric about the ‘free market’, about poor individual farmers escaping poverty byentering the fruit business, and about them getting good prices due to free competition among privatetraders, all this ideology falls far short of reality. An element of state planning and cooperativedevelopment appear to be far better instruments.

Bumper harvests always cause crashing prices, but with every individual farmer competing witheach other to produce the most for the current demand in the market, such overproduction isinevitable. Moreover, the smaller the farms and the smaller the processing units, the lower is theability to improve technology, let alone safe technology, and the more likely they are to use widelyavailable banned or bogus chemicals to improve their yield because they are cheap. “Poorinfrastructure, and small-scale production lines and farms have been blamed for this stagnation,causing an unwillingness among owners to invest more capital or upgrade to more advancedtechnology.”

Preserving fresh litchi using traditional methods causes a loss of 20 to 30 per cent of the fruit, andwhile the Institute for Preservation Technology, Institute for Vegetable and Fruit Research and theUniversity of Agriculture have developed a number of methods to better preserve fruit andvegetables, “the new technologies have not been yet applied as farmers have not been able topurchase the necessary equipment.”

For these reasons large orchard growers benefit more from converting to fruit, while small farmersattempting to “escape poverty” are just as likely to end up in debt, unable to invest in bettertechnology or to afford to market’s violent price swings. However, they may be able to develop theirown ‘economies of scale’ and buy better equipment if they form co-operatives. Luc Ngan’s KimBien Fruit Processing Co-operative is now the only drying facility to feature solar power, and hasalso entered the world–wide market, having established itself on-line. Working cooperatively wouldalso help farmers better plan together so that competition between too many small players does notdrive down prices as rapidly. They may also save farmers from relying on private traders driving ahard bargain.

The price of litchi at the height of the harvesting season is always one - third of the price at the startand end of the season. Nevertheless, this is when most poor farmers have to sell to traders, to repaydebts and pay for other necessities. ‘Free competition’ among private traders might sound good forfarmers, but in reality it does not mean such traders are silly enough to buy when they have to pay a 113 Above information on fruit drawn from Truong Cong Kha, ‘Fruit farmers warned to shape up or they’ll failto ship out in future’, Viet Nam News, October 11, 2002; Ha Phuong, ‘Playing the fruit machine’, VietnamInvestment Review, September 23-29, 2002; and Tu Hoang, ‘Fruits of neglect’, Vietnam Economic Times,September 2002.

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higher price to farmers, so they of course buy at the height of the season. There are no State-runtrading enterprises in Luc Ngan.

Price instability is also a feature of longan farming in the Mekong, as longan, like other Mekong fruitis “mainly exported to China by small traders in a haphazard way” and “who pick up the fruit atrock-bottom prices from the farmers.” In fact, this competition between so many traders carryingbumper crops means China can drive a hard bargain with them. The longan prices at the border gatesin northern Viet Nam are not much higher than the price on the farms in the Mekong, between 1,700and 2,200 dong per kg. So traders now are not even turning up to buy the fruit, which means theprices are falling even further while the longans are still on the trees. The falling price has led somefarmers into planting other fruit trees – but their prices are falling too.

However, a new MARD trade centre for litchi is planned in Luc Ngan. The centre will distributethousands of tons of litchi for growers and “is expected to help limit the downward pressure onprices caused by distribution through too many middlemen.” In addition, MARD “plans this year tostagger litchi planting with about 30 per cent planted early, 60 per cent at the usual time, and theremainder planted late” in an effort to protect farmers from violent price swings.114

5.5 Rich country protectionism – the case of aquaculture

Vietnam’s booming aquaculture industry is now seen as a key area for poor farmers to diversify into,especially in the Mekong Delta. Exports in the first eleven months of 2002 earned US$1.87 billion,an increase of 13%, making them the fifth biggest export earner.

Vietnam has long developed fish ponds as part of its pre-Doi Moi food strategy called VAC(Garden-Pond-Pigsty). However, the massive development of export aquaculture is a product of theexpansion of global trade in the 1990’s. Output from aquaculture doubled between 1998 and 2001.Seafood farms covered over a million hectares in 2001, of which 446,000 hectares were for shrimp.A sustainable growth of seafood production may aid poverty reduction and nutritional levels, but thecurrent massive growth, particularly if at the expense of food security, may pose even greater risksthan coffee due to its environmental impact (see 5.8C)

Another aspect is that where local farmers may be able to make some cash from exports, they arealready coming up against the many faces of rich country protectionism. The challenge toVietnamese catfish exports launched by the Catfish Farmers of America is a clear case of how therich can continue to pay lawyers to launch spurious court cases which cause huge losses to poorcountry farmers.

They first launched an unsuccessful SPS case against Vietnamese catfish; in reality, even the USembassy in Hanoi has substantiated the fact that growing conditions for catfish are hygienic. Catfishfarmers follow traditional methods, believing that fish that grow healthy make better profits. Theythen disallowed Vietnamese farmers to use the term ‘catfish’ for exports to the US, forcing them tore-label it as Tra and Basa. Finally, they launched an anti-dumping suit, which is absurd – there areabsolutely no government subsidies on fish, and the farmers, unlike US farmers, are too poor to sellbelow cost price to break into a market. They earn an average of 550-700,000 dong a month, or amillion dong in the processing plants. The cost of production in Vietnam is 13-14,000 dong (80-90cents) per kilo, and it sells in the US for $1.15-1.50 per kilo. In any case, Vietnamese catfish onlyaccounts for less than 2 per cent of the US market.

In November the US Department of Commerce (DoC) made the decision that Vietnam is a non-market economy. This decision means that, although the DoC acknowledged that there are no

114 All this section on litchi and longan growing comes from the Viet Nam News articles ‘Plunging litchi pricessour the outlook for Luc Ngan producers’, May 19, ‘Mekong farmers stare ruin in the face as longan pricesplunge’, July 4, 2002, ‘Litchi centre to stabilise prices’, May 10, 2002, ‘Fruit farmers warned to shape up orthey’ll fail to ship out in future’, Truong Cong Kha, October 11, 2002, and ‘Bumper litchi harvest yields abunch of marketing difficulties’ October 23, 2002.

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subsidies to Vietnamese catfish production, and hence no real ‘dumping’ case, just the fact thatVietnam does not yet conform to a total ‘free market’ model means the actual price of the catfishmay be low due to ‘distortions’ in the overall Vietnamese economy. This could lead to punitivetariffs of 190 per cent against Vietnam’s frozen fish imports.

Action Aid Vietnam led a research and protest campaign against this US protectionism, involvingalso Oxfam Hong Kong, the Vietnam Fishery Society, the Vietnam Farmers Federation and on-linenews VASC Orient. The research team found that catfish farming was the traditional means oflivelihood of large numbers of catfish farmers in An Giang and Vinh Long provinces, and even forthose new to the industry, “they do not have land to farm and they do not have other skills to take upa new profession.” They estimated that the livelihoods of 400,000 farmers would be negativelyimpacted by the success of US dumping charges, and in addition, “thousands of others in theprocessing factories, trade and input services will be out of work as well.” Farmers who have takenout large loans to invest in catfish farming will “incur heavy debt, which they will be unable to payback. Most farmers will go bankrupt.” The report also found that some families were already inheavy debt as a result of the decline in export volumes following the US directive to change thename of the catfish, and “due to the sharp fall in fish prices last year.”115 The price of Vietnamesecatfish has dropped from 13-14,000 Dong/kilo in 2002 to 9000 Dong now.

The seriousness of the situation is underlined by the 1997 success of a similar US anti-dumping suitagainst Chinese crawfish, after which “almost the entire sector collapsed and thousands of fishfarmers suffered from the loss.”116

While catfish is a traditional occupation in the delta, it should be noted that after beginning export tothe US, the quantity rose exponentially from 2000 tons in 1998 to 60,000 tons in 2001. If there havebeen large numbers of new entrants into the industry since 1998, and the US action succeeds, thisdoes raise further question marks about the wisdom of unbridled export orientation. Is selling upfarmland to enter the fish export industry something that should be encouraged under the banner of‘escaping poverty’ by moving to ‘higher value’ occupations? US animal feed corporations likeCargill have been major pushers of this expansion, organising the credit for many of the fish cages inthe Mekong, not surprisingly as intensive aquaculture relies on huge inputs of animal feed.117 Yet itis other US companies launching the dumping suits. For the likes of Cargill it’s a no-risk strategy – ifthe US fish and shrimp farmers win, Cargill will be able to sell more to them instead of Vietnamese,but the ruined Vietnamese farmers will still owe their debts. Western actors are thus involved at bothends.

Exactly the same is now occurring with shrimp. In October, the ‘Shrimp Importation FinancingFairness Act’ was introduced into the US Congress, accusing Vietnam and six other developingcountries (Thailand, China, Indonesia, India, Mexico and Ecuador) of dumping shrimp, anddemanding these countries reduce their shrimp exports to the US to 3 million pounds per month,compared to the more than 20 million pounds exported by these countries to the US in the first sixmonths of 2002.

Meanwhile, the EU has also used SPS legislation against shrimp imports from Vietnam, China,Thailand, Myanmar and Indonesia, having found chemical residue in some batches of shrimp. On theone hand, the Vietnam Association of Seafood exporters and Processors (VASEP) joined participantsof a new global alliance of shrimp exporters, the Global Aquaculture Alliance, in claiming the EU’s‘zero tolerance’ policy towards some kinds of antibiotics was unreasonable, because they are onlyharmful to humans in certain doses.118 However, whether that is so or not, the EU’s policy must beplaced in the context of the well-known problems of massive use of chemicals in the industry. Thus 115 ActionAid Vietnam, Stop the US Trade War on Vietnam, 2002116 ibid.117 “Feed accounts for the greatest portion of breeding cost. The two major components of feed are corn flourand soya powder,” ‘Catfish business takes off after Mekong breeders net a tidy profit’, Viet Nam News July 26,2002118 ‘Shrimp exporters cast global net’, Viet Nam News, October 5, 2002

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the expected short-term gains in export dollars resulting from intensification of shrimp productionneeds to be balanced with the fact that increasingly discerning rich country markets are simply notgoing to buy chemically affected food.

Therefore, a great deal of government control and regulation are needed. The Ministry of Fisherieshas issued guidelines for state agencies to inspect all stages of production, processing andtransportation to maintain standards and prevent the use of toxic chemicals. The Ministry is alsosetting up 15 marine protection areas along the coast in an effort to preserve bio-diversity.

5.6 Removing export quotas and licensing restrictions5.6A Rice export quotaIronically, while the stress on cash crops downplays staple crops, which earn less money, tradeliberalisation advocates think it can help rice farmers as well. They argue that by removing thegovernment’s quota on rice exports, and opening rice exports to private companies, more rice couldbe exported, and farmers could get better prices because world market prices were higher thandomestic prices – in other words, if Vietnamese people want to buy rice, they would have to competeon the ‘free market’ with wealthier consumers abroad, and hence pay higher prices to the farmers.Farmers would also get better prices from competing private exporters than from the SOE exportmonopoly. Hence “farm incomes, including those of the poor, who are most dependent on riceproduction, would rise,”119 as the “vast majority” of the poor are rice sellers rather than rice buyers.120 Only “urban dwellers”, who were better off than rural dwellers, would pay higher prices.

The low incomes of rice-producing farmers is an issue that needs addressing –especially by thosewho disagree with the World Bank’s downplaying of food security. However, this approach of tyingdomestic prices to world market prices is flawed in all its assumptions.

Firstly, the majority of rural dwellers are net rice buyers, not net rice sellers.121 The minority of netrice sellers include many of the rural rich, particularly large farmers in the Mekong. The rural netrice buyers - who grow rice but not enough, or grow other crops - comprise the great bulk of the ruralpoor (including women-operated farms, ethnic minorities and war disabled), while rural absoluterice buyers are virtually all poor, including the landless. The urban poor are also often former ruraldwellers, living on slums on city outskirts and often engaging in high risk activity. The four poorestregions (Northern Mountains, Central Highlands, North and South Central Coast) are rice deficitregions, while the two rice surplus regions (the two Deltas) are the second and third wealthiest.122

Rice accounts for 51 percent of total expenditure by the poor.123

The bulk of the rural poor would be negatively affected by having to pay very high rice prices, ifthey were determined only by world prices when they happen to be sky high, as in 1998-99 when theabove advice was given.

Secondly, there is also a significant number of poor rice sellers, who only have a marginal surplus tosell. If rice prices are too low, these farmers will be threatened with landlessness, or forced toconvert to some risky cash crop venture. But these farmers benefit little from high export prices.They usually have to sell straight after harvest, when prices are lowest, to pay debts and buyessentials, and they have no capacity for storage. Hence they have to sell to private traders who havetransport and storage, who can drive a hard bargain and reap the rewards of higher export prices.Even net rice buyers often sell rice for needed cash after harvest, when prices are low. Both groups 119 World Bank, 1998 II120 Anderson, p 54121 This is very clearly spelt out in Oxfam GB/HK, Rice for the Poor, 2002122 The wealthiest region is the South-East, which includes Ho Chi Minh City, but this region also has massiveinequality and huge numbers of urban poor.123 Niimi, Y, Vasudeva-Dutta, P, Winters, A, 2002, p12.

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have to buy rice later, when prices are high. So for poor sellers and buyers, a stable rice price is mostdesirable.124

Thirdly, these price highs are temporary. In 1998, the high world price was caused by factors such asthe collapse of the Indonesian economy.125 This encouraged increased production and exports,leading to a rice glut and hence ‘world market’ prices crashed. So even if WB advice had broughtbenefits for a couple of years, farmers then suffered from the collapsing world rice prices in 2000-01.Large farmers would have gained the most in 1998-99, and would have been in the best position tocope in 2000-2001; any small gains possibly made by marginal rice sellers in 1998-99 would havebeen wiped out.

Hence pegging rice prices to world market prices is not the best strategy to help farmers, as it simplypegs rice producers and consumers to world market volatility.

The government had already expanded the rice quota and loosened licensing rules to allow someprivate exporters.126 This was aimed at aiding rice sellers in the context of high world prices, whilestill able to use these tools to protect poor consumers; the call for the abolition of these tools outrightremoves this ability.

Yet the same opposition to non-market intervention advocated by the WB and the WTO preventsgovernments from protecting poor producers, as when the world price crashed in 2000-01. Thegovernment’s buy up of large quantities of buffer stock rice in 2001, to boost farm producers’ prices,and its ‘floor price’ of 1300 dong per kilo (assuring farmers a minimum profit of 20 percent overproduction costs), may also be considered export “distortions” or “subsidies”.

The government’s formal abolition of the rice quota and private sector export restrictions took placeat this time of depressed prices, so these measures aimed to benefit rice sellers did not hurt poorconsumers. In late 2001, rice prices began to rise again slightly. However, in October 2002, theywere still 30 per cent lower than in 1997, which was considerably below those in 1998.127

The current price level appears reasonable for both net buyers and sellers, encouraging the latter toboost production. However, exports to October had decreased by 9.4 per cent in quantity over thesame period last year.128 This indicates that the absence of the rice quota is not yet causing difficultyfor consumers – farmers are not exporting their higher production levels as the price is stillaffordable at home.

It is unlikely that rice prices will remain at this reasonable level. The market may be flooded again,as India “is forecast to keep reducing rice prices in remaining months of this year to secure moremarket shares from Thailand and Vietnam ... a tonne of Vietnam 25 per cent broken rice is traded atUS$173 compared with US$138 offered by India.”129 Hence ‘export at all cost’ strategies willcontinually depress prices.

Further, WTO ‘minimum access’ rules mean even countries self-sufficient in a product must be opento at least 5 percent imports of that product. In big cities, Thai rice is making inroads,130 while USrice is now being advertised. This will further drive down rice prices.

124 Oxfam GB/HK, Rice for the Poor, 2002125 The devaluation of the rupiah led to a 6-fold increase in the domestic rice price; bankrupt consumers couldnot afford to buy from their own farmers. This artificial “rice shortage” boosted world prices, so Vietnam couldsell to Indonesians at a high price which was still “cheap” compared to local prices.126 As the World Bank itself acknowledged when making these demands.127 As of October 2002, Vietnamese export 25 per cent broken rice is trading at $173 a tonne, compared to$245 in 1997 and $273 in 1998128 While increasing 24% in value due to better prices, ‘Rice exports reach 3 m tonne mark’, Dau Tu, October28 2002129 ‘Vietnam loses rice share to India’ October 23, 2002 Thoi Bao Tai Chinh Viet Nam130 Tu Giang, ‘Quality or perish’, Vietnam Economic Times, February 2003

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WTO rules remove the Government’s right to re-use measures such as the rice quota should theybecome necessary in the future, if the price (unexpectedly) gets too high. Yet there are signs in boththe CPRGS and the BTA that the government reserves this right.131

5.6B Rice export licensing restrictionsThe next assumption is that more private sector exporters competing with STE’s would mean betterprices for farmers. The government had expanded private sector export rights in 1998, and the firstprivate rice exporting companies were set up in 1999. This may have brought about some pricecompetition when the export price was high – though, as noted, it was unlikely to have benefitedpoor rice sellers. But once prices crashed, there was no leeway for exporters, state or private, tocompete by offering better prices.

The government completely lifted export licensing restrictions in 2001, when world prices were low.This may have helped pump out some more exports, but at miserable prices. To date there is noevidence that the abolition of the quota or the entry of the private sector has benefited farmers. Andthe great bulk of exports are still carried out by STE’s, as few private firms have such capacity.132

In the neo-liberal world-view, there is nothing beyond the all powerful STE. Yet the real monopolieswhich control rice export prices are giant agribusiness TNC’s, five of whom control world trade incereals. Neither state nor private domestic exporters can provide good prices to farmers if theycannot sustain their own operations, given the price the TNC cartel is prepared to pay.

STE ‘public monopolies’ exist to protect farmers and consumers from the volatility of the worldmarket and TNC cartels. They often do not do this well, their operations could be reformed, andsome competition from private enterprises may help.

But the WB-WTO view that state or private export enterprises should simply compete and if the STEgoes under, so be it, means depriving governments across the world of a tool they have long used toachieve social goals such as food security, agricultural development and protection of producers andconsumers from world market volatility.

For example, in 2001, state exporters were subsidising prices by paying the government’s ‘floorprice’ of 1300 dong per kilo, 200 dong over the ‘market’ price, and barely breaking even whenexporting. “Our member companies are hesitant to enter such contracts, but they are virtually forcedto do so because they are state-owned enterprises whose function is to some extent politically-oriented,” according to Duong Thi Ngoc Tranh, Vinafood II director.133 Private companies, whichexist only for profit, cannot do this, let alone offer better prices. It would also have been moredifficult for the SOE’s to do it if their profits had suffered too much while prices were high due tocompetition from private exporters.

Similarly, the government subsidised the interest on loans for all the rice STE’s to buy up largeamounts of rice from farmers in 2001 to maintain farmgate prices. WTO rules may see this as a‘subsidy’ to STE’s not available to private and foreign exporters. However, if STE’s are fullyexposed to competition of TNC exporters and they go bankrupt, the government may have to insteadsubsidise large private exporters.134 Should the state give the same subsidies to its own enterprises,which it uses to achieve social goals, as to private firms, which cannot be used in this way?

131 The CPRGS pledges to “continue to remove QR’s imposed on rice exporting enterprises … continue toliberalise output markets (rice, coffee etc)”, suggesting such liberalisation is not yet complete; in the BTA, theremoval of qualitative restrictions, licensing restrictions and state trading regarding rice exports are all in the“unbound” category, meaning that Vietnam is not bound to phase them out132 Of $600 million in rice exports in 2002, $500 million was exported by just two state companies, theNorthern and Southern Food Corporations, and there are many other state exporters before coming to privateones, ‘MARD exports reach $803 million’, Viet Nam News, November 11-17, 2002133 ‘Seeds of Doubt’, Vietnam Economic Times, February 2002134 Oxfam notes this problem in Rice for the Poor, 2002, though appearing to endorse this ‘level playing field’

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Putting aside TNC’s, domestic private monopolies have the potential to be worse than state‘monopolies’; the ‘free competition leading to better farmgate prices’ view is in most cases a myth.In the Philippines, the withdrawal of the National Farm Authority (NFA) from procurement andpricing led to an alliance of large private rice trading companies known as the ‘Big 7’, which controlall aspects of rice procurement and distribution as a cartel. Far from improving farm prices, theyhave fallen and farmers are in a much worse position.135

WTO rules mean that foreign TNC’s can also replace STE’s in domestic procurement for export anddomestic sales. Since the Indian government stopped procuring rice, giant TNC’s such as Cargill andNestle have procured wheat and rice from Indian public stocks at ridiculously low prices, selling iton the domestic market and for export. Yet the low prices they pay to producers are not passed on tolocal consumers. Producers had to sell at Rs 3000-3250 per tonne (the government’s earlierminimum price was Rs 5400), but poor Indians had to pay Rs 11,300; exporters got it for Rs 5650.136

This is monopoly.

Does the depressed world rice price at least make rice cheaper for poor net food importing countries?According to NGO sources, trade liberalisation has increased food prices to poor consumers. Againthis can be explained by TNC monopoly. Cargill and Continental “are buying wheat at $60-100 pertonne from India and selling it at $230-240 per tonne on the international market, making a neat$130-170 profit per tonne, while India is losing $100 million in exports.”137

Yet rich countries adopt the reverse policies when they have surplus grain and want to break into themarket of a self-sufficient grain producer. Kenya, which was self-sufficient in the 1980s, is nowimporting 80% of its food. “In 1992, EU wheat was sold in Kenya at a price 39% cheaper than it waspurchased from European farmers. In 1993, it was 50% cheaper. In 1995, Kenyan wheat pricescollapsed through oversupply.”138

5.6C Coffee and rice export deregulation and price crashingIt is ironic that the emphasis on abolishing export quotas and licensing restrictions aims at pumpingout higher levels of exports, when the massive coffee price crash was caused by such unregulatedexport levels. Coffee exports have been open to private sector for some time, and evidence suggeststhis may have worsened the crisis. According to Vietnam Coffee Association president Doan TrieuNhan, ‘Small-scale exporters are easily affected by the pricing crisis and they are willing to sell theirproducts at cheap prices to liberate their stockpiles, regardless of the resulting negative impact on thewhole coffee export industry.”139 And QR’s on coffee exports are now seen as necessary byeveryone, even if they don’t use that term. Having most exports go through SOE’s is the easiest wayto achieve this.

The same may be true of rice. In fact, the export quota was only introduced in 1994, and the drasticreduction of the number of SOE’s allowed to export only occurred in 1992, in response to themassive price collapse brought on by the rice glut Vietnam’s new exports brought to the worldmarket in 1992.140 This export glut was brought about by the sheer number of enterprises (provincialSOE’s in this case) exporting uncontrollably (no doubt ‘providing price competition’). The pricecollapse impacted on small producers, while the previous export expansion was far in advance of theexpansion of local consumption, at a time when malnutrition was increasing in the early 1990’s.141

The vast superiority of the 1993-98 period in poverty reduction over the disastrous early 1990’s iswell-established fact.

135 Development Forum, 2002, p23-24, 26-27136 Shiva 2001137 Shiva, Holla and Menon, 2001138 Feyissa, 2001139 ‘Bigger exporters targeted to filter out coffee losses’, Vietnam Investment Review, June 22-28, 2002140 Niimi, Vasudeva-Dutta, Winters, 2002, Appendix 1, Table 4.141 Kolko, 1997, p105-6

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5.6D Better ways of helping marginal rice farmersStressing the unlikely benefits of export deregulation on poor net rice sellers ironically ties them to astrategy of rice monoculture, supposedly something trade liberalisers aim to avoid by advocatingabandoning rice in favour of “diversifying” into cash crop monocultures elsewhere. In reality, poorfarmers see rice as a means to live,142 and see concurrent diversification into livestock or otherfood crops, or paid work, such as handicrafts, as more likely to raise cash. Such areas are also likelyto benefit women (see 5.8C). Indeed, even in the rice surplus Red River Delta region, work in thebooming handicrafts sector has been more responsible for escaping poverty than rice sales.143

To claim that the rice quota and SOE control of exports disadvantages small rice sellers ignores thefact that domestic rice prices continually rose between 1993 and 1998, by 20-30 percent throughoutthe period.144 In fact, apart from seafood prices, rice rose more than any other major consumerproduct, many of which fell.145 While this was partly due to the government relaxing the quota, thequota still applied and did keep prices 14-22 percent below export prices.146 The rises thus reflectedthe growing domestic market, and this balanced increase had a beneficial effect on rural dwellersjudging by the massive decrease in rural poverty during the period (though not on ethnic minorities).The fact that the poor in the Mekong Delta, the main rice surplus region, and the region with by farthe biggest growth in rice production, showed the lowest national drop in poverty and the highestshift back to poverty147 indicates that rising domestic prices barely reached them. Export prices thuswould have been lees likely to.

The problem is land – this region has the greatest degree of land concentration and landlessness inthe country, and has been exposed to market liberalism more thoroughly than any other region. Withlittle land, they can neither diversify into other crops and livestock, nor have much rice to sell, norhave any bargaining power with private traders. There is simply nothing in recent MARD, Oxfam orActionAid rice reports to show the poor have in any way benefited from export liberalisation. InActionAid’s report, the poor consistently did not list an increase in prices as something likely tobenefit them “because they never had any rice to sell.”148

Vietnamese experts tend not to stress ‘trade liberalisation’ solutions, but integrated pestmanagement, efficient rice-drying methods, rice-sowing machinery,149 and improving post-harvestfacilities, which currently affect quality and result in huge losses150 - according to MARD, post-harvest grain losses account for 16 per cent of total annual output.

Another aspect would be the encouragement of new cooperatives, so that farmers can negotiatebetter prices with private traders or even take over their functions. Pre-CPRGS consultation with thepoor in both Tra Vinh and Vinh Long revealed the poor want more direct links to exporters, ratherthan through middlemen “who have too much power to set prices and costs”; some even wanted thestate to directly buy their produce. Cutting out the private traders and millers would directly raisetheir prices. Through cooperatives, farmers could also pool resources for new technology (eg ricestorage facilities so that they do not have to sell to traders immediately after harvest) or to invest incash cropping while setting aside rice land for food security (see 6.2).

142 Oxfam GB/HK, Rice report 2002143 “Between 45 and 75 percent of rural incomes are related to making and selling handicrafts,” ‘Craftysolutions, Vietnam Economic Times, September 9-15, 2002144 Justino and Litchfield, 2002, p37145 Niimi, Vasudeva-Dutta, Winters, 2002, p11146 ibid p6147 ibid pp 13-14, 32, 36. 43 percent of all people falling into poverty were in the Mekong, p34148 ActionAid/Centre for Rural Progress, Rice and Trade Liberalisation Report, 2002149 ‘Improving rice strains will boost living standards for farmers: scientist’, Viet Nam News Oct 18 2002,quoting Professor Nguyen Van Luat150 ‘Food security remains a prime concern: regional researchers’, Viet Nam News September 16, 2002, quotingDoctor Luong Thi Minh Sam, Deputy Director of the Institute of Social Sciences in HCM City

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5.7 Removing import quotas and licensing restrictions - fertiliser

The Bank similarly demanded the removal of all quantitative restrictions on the import of fertilizers,seeds and sugar, and opening international marketing of these products to private businesses, as thecurrent situation “results in higher costs for farmers.” Sugar is touched on above with other cropsaffected by import surges (5.3C), while seeds are dealt with as a biodiversity issue (5.8A). Here wewill concentrate on fertiliser.

It is legitimate to ask how the cost of farm inputs can be reduced. The other issue is protection for thestate fertiliser firms and workers’ jobs. The assumption is that since fertiliser is so essential to vastnumbers of poor farmers, their interests should be put before the interests of the SOE’s and relativelysmaller numbers of workers, if import fertiliser prices are cheaper than locally produced goods. Infact, the Government had already expanded the quota and loosened private sector import restrictionsto help farmers. ActionAid claims the price difference was only 5 percent, and the Government oftenremoves this difference when times are tough.151

However, the issue of completely removing all quota and licensing restrictions means removing aweapon the Government may need to use to prevent the collapse of the local fertiliser industry. Themaintenance of a local state fertiliser industry is in the longer-term interests of farmers becauseworld prices are not always lower. Relying on the ‘world market’ to reduce costs for producers onlyattaches their fate to world market volatility.

World fertiliser prices continually rose in the 1990’s, reaching record highs, but when the Bankadvocated these measures, prices happened to be lower than those of locally produced fertiliser.They fell in 1998-99 when oil prices were low and China stopped importing, leaving a huge surpluson the world market. Yet within a couple of years, ‘world market’ prices were already rising (in2000, farm-gate prices of imported urea fertilizers increased by 10-30 percent).152 Prices are tipped torise sharply now that China has entered the WTO, is importing massively, and loss of protection mayclose some of its fertiliser plants.153 It is precisely the existence of a local fertiliser industry in China(and hence in other countries such as Vietnam) that keeps world prices low. By contrast, in Malawi,which relies completely on imports, fertiliser prices rose by sixteen times when fertiliser import anddistribution was liberalised in the 1990’s.154 In 2003, world fertiliser prices have shot up due to highoil prices with the war threat, with urea rising from $120 to $156 per ton in a matter of weeks.155

If in the interests of lower prices for farmers, Vietnam had abolished import quotas and licensingrestrictions in 1998, and the flood of cheap imports had bankrupted fertiliser SOE’s, the new“private” importers would have been the few giant TNC’s who control world trade and production infertilisers and every other aspect of the food chain. Then as the world price, controlled by theseTNC’s, is now rising again, farmers would be paying higher prices, while thousands of Vietnameseworkers with secure state jobs would be unemployed, and the state would have lost tax revenues andthe ability to control price volatility.

The government finally abolished all quotas and licensing restrictions in 2001, when, however, theworld price was rising. Before the current price hike, prices dropped again in 2002, resulting in aflood of dumped imports. But this did not help farmers.

According to the National Farmers Association (NFA), although fertiliser was plentiful (bothdomestic and imported) farmers were facing a fertiliser shortage and paying high prices whilefertiliser firms were having difficulty selling their products. Pham Quang Ton from the NFAexplained that “the State controls the production of fertiliser, but fertilisers are supplied to farmers byprivate traders. These traders only aim to make a profit, so even though fertilisers are in stock,

151 ActionAid/Centre for Rural Progress, ‘Fertiliser Situation’ in Rice and Trade Liberalisation Report, 2002152 Oxfam GB and HK, Rice for the Poor, 2002, p 44153 ‘The Bilateral Boost’, Oman Economic Review, 2000154 World Development Movement, 2002155 ‘Fertiliser price spike hits local farm sector hard’, Viet Nam News, February 25, 2003

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farmers still have to buy at a high price.”156 One way of dealing with this, the same problem with thecontrol of rice distribution from farmer to exporter by private trader, would be to encourage farmercooperatives to distribute rice for export and fertiliser inputs.157

As fertiliser firms were thus working under capacity, it is difficult for them to produce cheaply orinvest in better technology to produce more cheaply in the future to compete with imports. TheVietnam Fertiliser Association (VFA) called on the government to drop VAT on locally-producedfertiliser while maintaining it on imported fertiliser.158

Encouraging cooperatives and scrapping VAT would be in the interests of both farmers and domesticproducers. But encouraging cooperatives is seen by the Bank as “favouring” one form of enterpriseover another; and VAT is always pushed in IMF advice, though it taxes rich and poor equally.Scrapping VAT on domestic fertiliser but maintaining it on imports would go against liberalisationrules that local enterprises get no preferential treatment.

The BTA indicates that the government still aims to prevent TNC’s becoming the dominant localdistributors – control of domestic distribution of fertiliser imports via licensing restrictions remainsin the ‘unbound’ category. To protect farmers, the government or SOE’s also provide wide-rangingfertiliser subsidies to poor farmers – which may be considered “distortions” under the WTO regime.159

5.8 Export intensification, environmental degradation and erosion oftraditional practices

Trade liberalisation inevitably means intensification of agricultural production, because more andmore export dollars are required to pay for more expensive imports. This is having a significantimpact on the environment - while large farmers and large traders make most of the gains, poorfarmers and labourers have to pick up the pieces when unsustainable levels of production destroy theenvironment in which they can no longer return to food production. It is also threatening thecountry’s rich diversity of biological resources on which the poor depend for 90 percent of theirneeds.

5.8A Seeds, TRIPS and Women’s KnowledgeThe World Bank proposes to “open the seed industry to imports and domestic private sectorproduction” in particular, of genetically engineered varieties, as this will make “seeds cheaper andmore plentiful, and important new varieties available”. This needs to be looked at in conjunctionwith the TRIPS agreement discussed above.

Vietnam imports hybrid rice seeds from China, but they are state-from state imports, and Vietnam isactively involved in production and research itself.160

According to ActionAid, “the current patent system is giving agrochemical corporationsunprecedented legal control over the food chain. The number of patents on the five crops thataccount for 70 per cent of the world’s food supply is rising steadily by the month.”161

Six corporations Aventis, Dow, Du Pont (which includes Pioneer), Mitsui, Monsanto (whichincludes Cargill) and Syngenta (formerly Novartis and AstraZeneca) - have cornered global seedmarkets. They control 98 per cent of the global market for patented GM crops, 70 per cent of theglobal pesticide market and 30 per cent of the global seed market, including 633 patents, or nearly 69 156 ‘Local Suppliers Find Fertiliser on the Nose for Cash-Strapped Farmers,’ Viet Nam News, November 4,2002, at a seminar in November 2002 in Hanoi, held by the NFA and the VFA157 According to Oxfam GB & Oxfam HK, Rice for the Poor, 2001, p47, 59158 ‘Fertiliser sector pleads for tax cut’, Vietnam Investment Review November 4-10, 2002159 Oxfam GB & Oxfam HK, Rice for the Poor, 2001160 GRAIN, 2000161 Action Aid, 2001

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per cent, of the total of 918 patents on rice, maize, wheat, soybean and sorghum, the staples that arevital for the poor.

Nearly all companies conducting research and development of hybrid rice in Asia, except in Chinaand Vietnam, are owned by or linked to the world’s largest seed companies.162

Such monopolisation makes clear that the “private sector” the Bank refers to does not mean someimaginary domestic SME’s who just happen to have the enormous resources necessary to engage insuch high level research, but rather these “private” TNC’s.

In the past, TNC’s were not interested in seeds, because farmers traditionally save seeds from theprevious crop, making profiting difficult. Now, “with the advent of adequate intellectual propertyprotection, private sector investment in rice has dramatically increased, particularly in the seedindustry.” The ADB is financing a “Development and Use of Hybrid Rice Outside China” projecttargeting Asian countries. It includes IRRI, FAO and Asia Pacific Seeds Association (APSA),grouping the major private seed companies operating in Asia. APSA’s role is to promote large scaleprivate sector production of hybrid rice, gaining access to IRRI’s parental strains.163 Therefore,private monopolies will have access to publicly owned rice strains, collected by IRRI from smallfarmers over the decades, and then these companies will have ‘intellectual property rights’ over these‘altered’ strains which they sell back to these farmers!

This means that “farmers who grow patented crops may have to sign contracts and pay royalties tothe patent holder, they may be denied their right to save, grow, exchange or re-sell seed” yet 1.4billion people in the world depend on saved seed. Hybrid seeds already cost between 100 to 350 percent more than traditional seeds, and are priced 15 times higher than openly pollinating varieties.164

Women are the traditional savers, breeders and exchangers of seeds. In a survey of rice varieties inthe Mekong, Government officials and male farmers generally mentioned 8-10 varieties, but thewomen mentioned a hundred local varieties. “The ten high-yielding types were privy to productionmethods, whereas the others were not,”165 illustrating the fact that women’s knowledge is rarelysolicited in production plans. The rising power of seed corporations is a direct threat to an area wherewomen have some control, and to an entire culture based on such seed development and exchange.

Is it worthwhile for women to exchange this power for varieties which are more ‘high-yielding’ andthus bring more cash to the family? In fact, hybrids are only high yielding when other conditionsrelated to irrigation, chemical fertilisers and pesticides are met, hence higher yields are balanced withhigher costs. Dr. Tran Van Dat noted that “Thai rice costs less to grow than ours because 70 per centis intensively cultivated with traditional strains, which need less chemical fertilisers and irrigation.”166 Also, the genetic base of hybrids is narrow, most derived from one Chinese maternal parent,narrowing the nutritional base of staple crops.167

Throughout the developing world, there is a large gap between rice yields in the laboratory and in thefield. In Vietnam, yields are “two to three tons lower per hectare than in research centres. Output ofirrigated rice could be increased from 6 to 8-9 tons, and of non-irrigated rice from 2 to 4 tons perhectare.”168 FAO believes that, if this gap were closed (eg by stopping post-harvest losses), globalrice output would rise 25 per cent – considerably more than the average yield gain involved inswitching to hybrids.169

162 GRAIN, 2000163 ibid.164 GRAIN, March 2000165 Isis International, 1999166 ‘Gene technology could engineer solution to rice production problems’, Viet Nam News September 28, 2002167 GRAIN, 2000. In Cambodia, one hybrid accounts for 84% of the dry season crop; in the Philippines, twoaccount for 98 per cent of the entire rice crop.168 ‘Gene technology could engineer solution to rice production problems’, Viet Nam News September 28, 2002169 GRAIN, 2000

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The advent of GMO’s in the hands of TNC’s completes their dominance, as these crops can cross-pollinate with local crops. Once this occurs, there may be no way for farmers to protect theirtraditional varieties or avoid becoming dependent and paying ‘intellectual property’ prices to theTNC’s. GMO’s have also been shown to cause strange new crop diseases,170 which can spread fromGM fields into non-GM fields via cross-pollination. GM is also very expensive, needing 13-15 years“to transfer each new variety created to farmers and costs about US$30 million, in addition to royaltyfor using the patents.”

5.8B High tech fixes versus traditional methods in agricultureSo are these hybrid and GM seeds, and other ‘Green Revolution’ products like chemical fertilisersand pesticides, good for poor farmers? The Bank believes there can be “further gains in yieldsthrough wider adoption of high-input hybrid rice, increased fertilizer use” and that the future lieswith genetic engineering.171

On the other hand, the Bank has verbally endorsed Integrated Pest Management (IPM) but this isunlikely to be encouraged given that it carries out a “Staff Exchange Program” with major agro-chemical TNC’s, which have been involved in a range of harmful activities.”172 Bank projects “stillsupply farmers with pesticides, introduce agricultural systems that lead farmers to become highlydependent on chemical inputs and/or fail to provide training in ecological alternatives. A review ofWorld Bank agricultural projects between 1997 and 2000 reveals – with few exceptions – thehistorical bias towards intensifying production with greater use of pesticides predominates. Fewproject documents even mention IPM.”

The ‘cash crop for export’ model, relying on intensive mono-cropped non-native crops, is unsuited toecological methods, often necessitating pesticides. Monocultures lead to greater attacks by pests, asdoes replacing traditional varieties by foreign hybrids, leading to increased pesticide use.173 Whenfood grain imports start flowing into Vietnam under trade liberalisation, the ‘necessity’ of increasedchemical inputs to boost yields will be increased, given the huge difference in per hectare outputbetween rich and poor countries.174

Thus farmers abandon their traditional and ecologically sound agricultural practices in favour ofexport monocropping. Women farmers are particularly disadvantaged due to the predominance ofmen in agricultural programs offering farming technologies, education and loans, meaning they tendto remain more focused on labour intensive methods centred on unpaid family labour. However,their labour often brings the household a great variety of domestic and wild plant and animal foodand medicine products, of which women have a great deal of knowledge which is not utilised indevelopment programs.175 Ethnic minorities in particular rely on traditional mixed cultivationmethods, and they have not gained by switching to cash-crop monocultures, as the coffee disaster inthe Central Highlands indicates. Vietnam’s successful Garden-Fishpond-Pigsty (VAC) model ofsustainable crop diversity is undermined.

There are many cases when controlled use of chemical pesticides, chemical fertilisers or non-nativeseeds helps boost yields, depending on the geographic conditions. However, TNC’s which dominatetheir international marketing have a vested interest, these inputs are expensive for the poor, tend toexclude women, and are environmentally ruinous. “If the situation continues, rice fields in Vietnam

170 Nadeem Iqbal, ‘Pakistan compromises on GM seeds question’, Viet Nam News, November 16 2002171 World Bank 1998 II172 Pesticide Action Network, 2002. Activities “including illegal toxic shipments, chemical dumping andaccidents, chemical testing on humans, harassment of farmers, false advertising and racketeering”173 GRAIN, 2000, for the rise in pest attacks on hybrid rice in China.174 ‘Technology needed down on the farm’, Viet Nam News, October 2, 2002175 Isis International, 1999

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will soon lose their natural fertility.”176 IRRI’s research confirms massive environmental degradationfrom green revolution technologies.177

Therefore, it is worth considering the literature on the benefits of modified traditional farmingpractices. At present, $800,000 per year is spent on research and development of integrated pestcontrol techniques and bio-fertilisers. Of late there have been a great number of reports in theVietnamese media about using organic fertilisers, integrated pest control techniques, traditionalvarieties and intercropping methods.178 The government’s major agricultural research programcombines “advanced technologies with traditional techniques.”179 It has had the “startling” result of“the recovery of eight traditional rice varieties from the northern provinces.”180

In An Giang Province, a successful organic rice plantation has been trialed where chemicals arecompletely forbidden, farmers instead using “cattle manure, organic fertilisers and bio-pesticides.”The rice was “more fragrant and nutritious than rice grown using chemicals. It also fetched a priceVND500 higher than non-organic rice.”181 The state Long An Foodstuff Company has signed acontract to purchase all the organic rice grown on 80 hectares in Vinh Hung district.

Recognising that “the biological diversity of Vietnamese crops is threatened by modern commercialagriculture with its high-yielding varieties”, the Government has set up eight “gene managementzones” in mountain and midland regions where it will “work with communities to develop new orincreased markets for traditional varieties” with particular emphasis on traditional varieties of rice,taro, litchi-longan, rice bean, citrus and tea.182

By conducting its own research into modern techniques, Vietnam stands a better chance of beingable to provide its farmers higher yields and avoiding a crushing dependence on TNC monopolies,while conducting research into traditional techniques may even prove more beneficial. However,even IPM training classes tend to be aimed at male farmers, while many traditional techniquesembodied in women farmers’ knowledge are passed over as ‘backward’ ideas, and as noted above(5.9B) not utilised or developed.

Moreover, the whole area of traditional medicine, an area where rural women, particularly ethnicminorities, have highly sophisticated knowledge, deserves more attention and may be an area offurther research. However, ‘globalisation’ strategies may not be the best way to either enhancewomen’s position, protect traditional medicine or alleviate poverty. On the contrary, such varietiesgrow in delicate native conditions – attempts to massively cultivate monocultures will destroy thevery essence of such crops, particularly using chemical or ‘high-yielding’ methods. Above all, exportorientation is likely to rapidly deplete local stocks, the poor losing a non-market health alternativeand the country a valuable resource, while rich male middlemen make a killing.183

5.8C Environmental degradation and aquacultureShrimp production increased from 200 tons in 1976 to 100,000 tons in 2000 – and then to 158,000tons just one year later.184 Vietnam is now the world’s fifth largest shrimp producer.

In the national fisheries’ plan, these exports are forecast to earn US$2.5 billion each year. A dramaticincrease in shrimp production, with anticipated yearly earnings of US$1.4 billion (up from the 176 ‘Agbiotech revolution yet to reap harvest’, Vietnam Economic Times, June 17-23, 2002, quoting Dr NguyenVan Uyen of the National Centre for Natural Science and Technology177 GRAIN, 2000.178 For example, ‘Fertile minds find use of green waste’, Viet Nam News Oct 11, 2002, ‘Rice farmers boostyields, cut costs with innovative cultivation method’, Viet Nam News June 10, ‘Farmers choose their future’,Viet Nam News October 5, 2002179 ‘Minister says VN well on way to world standard livestock, crops’, Viet Nam News Aug 27, 2002180 ‘Northern ricebowl farmers come to grips with the latest in agriculture’, Viet Nam News Aug 19, 2002181 ‘Cuu Long Delta farmers pioneer ambitious organic rice growing plan’, Viet Nam News, June 3, 2002182 ‘Viet Nam's Crop Diversity threatened by Commercial Agriculture’, Viet Nam News, 2002183 Sowerwine, 1999184 Tu Giang, ‘Prawn Cocktail’, Vietnam Economic Times, November 2002

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current $780 million), is the centrepiece of this strategy, which the ministry believes will create sometwo million new jobs.185 To do this, Vietnam will double shrimp output to 300,000 tons annually.Since this is to be achieved by expanding cultivation to only 500,000 hectares186 from its current446,000, it implies a huge degree of intensification.

The World Bank has advocated such a strategy, claiming “Vietnam has significant potential forexpansion of aquaculture, through both intensification of production in existing areas and bringingadditional areas under production. It is estimated that only half of the area suitable for aquaculture isbeing used.”187 Even the Bank cautioned, however, that solutions must be found for persistentdisease and pollution problems, and that better definition of property rights to land and water areaswas necessary. Yet such advice is contradictory for a number of reasons:

Firstly, it is precisely such “intensification” that creates far greater “disease and pollution problems.”

Secondly, the Bank, for ideological reasons, cannot combine its recognition of problems with anystate regulation, stating “the responsibility for what aquatic species to grow, how to grow them, andwhere to sell them should rest squarely with the growers, and they should bear the risks.” While thismay be an attempt to avoid ‘top-down’ state directives to farmers, given the extremely seriousproblems, this “let the market rule” view may lead to similar to that of coffee. Since “marketinformation” would tell poor farmers that at the moment they can get a good price for shrimp, whynot go in head first and “bear the risks”.

Thirdly, as a major export item, restrictions or regulations are unlikely considering the flood of cheapimports Vietnam is about to confront with AFTA, the BTA and Bank conditionality. As the Bankreports claim this flood of imports will be good because it will reduce prices for a number ofconsumer goods, the country will need steeply rising exports of whatever it has to pay for theimports. Covering the country with catastrophic intensive shrimp ponds would thus be an obvious“comparative advantage” in the short term.

Global consumption of prawns has skyrocketed by 300 per cent over the last ten years. “Shrimpfarming has emerged as the cornerstone of a vast multinational industry worth an estimated US$9billion annually. Inevitably, supply to meet this demand falls to the developing world to keep costslow in this highly competitive market,” notes the Environmental Justice Foundation.188 How could a“globalised” Vietnam keep out of this?

The effects this expansion of production and export of seafood, particularly shrimp, will have onpoverty among rural dwellers in Vietnam can be looked at from two angles:

On the one hand, the massive problems of disease, pollution, debt, landlessness, land degradationand threatened food security – including of fish! – that are inherent in this industry. Who really willgain from intensifying production and increasing exports?

On the other, to the extent that exports are successful and do bring benefits to a section of the poor,these exports increasingly come under threat from First World protectionism, as has already becomeclear with the US “anti-dumping” challenges to both catfish and shrimp imported from Vietnam.

The ‘Food First’ organisation explains the difference between extensive and intensive production ofshrimp in a very useful backgrounder:

“Extensive systems, in countries including Vietnam, Bangladesh, the Philippines, and Indonesia, arecarried out in low-lying natural enclosures close to the sea along estuaries and bays, often in seasonallagoons. Tidal flows into and out of the enclosures provide the stock of juvenile shrimp, feed, andwater exchange. Stocking densities are low and yields can range up to 500 kilos per hectare” (inVietnam, average shrimp yields are 360 kilos).

185 ‘Shrimp exports key to fisheries plan’, Nguoi Lao Dong, October 21, 2002186 Tu Giang, ‘Prawn Cocktail’, Vietnam Economic Times, November 2002187 World Bank, 1998 II188 Environmental Justice Foundation, 2002

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“The semi-intensive systems in Latin America and China generally are located above the high tideline and characterized by larger capital investments; the construction of artificial ponds from 2 to 30hectares in size; the use of commercial feeds; and the use of diesel pumps for water exchange. Yieldsrange from 500 to 5,000 kilos per hectare.

“Intensive systems in Thailand, Taiwan, and some areas of Indonesia, are characterized by smallerindividual ponds (0.1 to 1.5 hectares in size); high stocking densities; use of commercial feeds,pesticides to kill predators, antibiotics to prevent disease, non-organic fertilizer to boost nutrientsupply; diesel pumps for water exchange; more frequent flushing of pond wastes; and aeration.Yields can be quite high - from 5,000 to 20,000 kilos per hectare - but intensive farms are also mostprone to shrimp diseases and mortality, and generate a huge amount of pollutants that chokeestuaries and other natural ecosystems when flushed out.” 189

All this chemical effluent from the ponds is pumped back into the natural environment. The EJFnotes that “within a few years, this ruthless and intensive exploitation of natural resources inevitablyleads to a build-up of toxins and eventually environmental collapse, leaving behind a barrenlandscape and dispossessed communities.” This environmental destruction is further exacerbated bythe fact that shrimp ponds demand fresh exchanges of water, leading to salinisation of soils anddepletion of ground water.

Such “shrimp graveyards” are widely evidenced in neighbouring Thailand. “It has been estimatedthat over 20 per cent of shrimp farms in former mangroves in the Gulf of Thailand are abandonedafter 2-4 years, And shrimp farming there is becoming ‘nomadic’, with farms moving further andfurther south as land is abandoned.”190

Far from enhancing good security, “previously sustainable small-scale local fisheries have beendestroyed and croplands including fertile rice paddies flooded with salt water.” For “generations ofcoastal subsistence communities who have sustainably exploited coastal mangrove forests and thesea for food, building materials, traditional medicines and firewood … the destruction of mangroveforest to make way for shrimp ponds leads to a loss in the marine harvest.” It is estimated that some38 per cent of all world losses of mangroves, which provide nursery and spawning grounds for manyof the world's commercial fish species, may be due to shrimp farm development. “For everykilogram of shrimp farmed in mangrove areas in Thailand, an estimated 434g of fish and shrimp arelost from capture fisheries due to habitat conversion alone.”

Even worse, “shrimp are often fed on fishmeal, whereby more than four kilos of fish are used toproduce just one kilo of shrimp. Farms are stocked with wild-caught larvae, and for every singlepound of shrimp larvae caught, 20 pounds of by-catch (non-target species, for example fish,crustaceans and other marine life, including rare and endangered species such as turtles andseahorses) is discarded into the ocean, dead or dying.”191

How any of this can be seen as an efficient way of reducing poverty or guaranteeing food security isa mystery, but as with other boom and bust industries, many may gain in the short term, while for thepoor, the temporary gains in cash will be comprehensively wiped out by the destruction in theirwake, while those who make the biggest short-term gains will also be those able to walk away fromthis destruction with bucket-loads of cash to invest elsewhere. Not surprisingly, in an industry thatrequires large-scale chemical and other inputs, the rich or those able to get rich at the expense ofothers on the “free market” not only end up getting most land, but also often get it using ruthlessmeans.

According again to the EJF, “there are innumerable cases of subsistence communities having theirnative land sold out from under them, creating a direct contest for resources and transforming anopen-access shared resource into a single-owner, single-user plot, often jealously protected by armed

189 Food First, 2002190 Tu Giang, ‘Prawn Cocktail’, Vietnam Economic Times, November 2002191 Environmental Justice Foundation, 2002

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guards.” Much as the WB may talk about “clarifying land use rights”, it is precisely their aim ofcreating a “real land market” that will allow such large “single-owners” to replace such “inefficient”ideas as “shared resources.”

Laws often mean little, as “the inequality between shrimp farm operators and local subsistencecommunities means that the latter often have no recourse to the law, whilst the former have little tofear from it … a catalogue of abuses including illegal land seizures, false imprisonment, summaryexpulsion, intimidation, rape, arson, violence and murder have all been inflicted on localcommunities at the alleged behest of shrimp farming operators, often with the complicity of corruptlocal officials.”192

Finally, from a poverty point of view, “shrimp farming, outside of harvesting and packaging, is notlabor-intensive. Neither is the industry known for providing high wages, except to the fewaquaculture experts who set up and maintain production systems,” according to Food First.

The worst abuses and violence reported in other countries have not thus far been reported inVietnam, though much research still needs to be done. Clearly, many farmers have made significantincome gains in the initial stage. In parts of the poor central coast, such as Thua Thien-Hue, QuangNam and Quang Binh, shrimp farming is being offered in a region where many crops are difficult togrow in the sandy soil. However, Vietnam has not yet got heavily into intensification of shrimpfarming, and the ability to grab large land-holdings is still relatively restricted by Vietnam’s landlaws. Such things will change with increasing trade liberalisation and land law liberalisation.

Many of the coming problems are already obvious. Many of the so-called ‘improved extensive’farms started in the Mekong around 10 years ago are experiencing the familiar disease and pollutionproblems. Epidemics have already struck fiercely. Between January and March 2002, disease struck63,000 hectares around Ca Mau.193 Reports have now appeared that Mekong rice land is facing a“salt invasion”. In Bac Lieu and Ca Mau, “nearly 80 percent of farm land has extremely high saltlevels due to shrimp breeders dumping salt water on fields.”194

Those who can afford it may upgrade to ‘semi-intensive’, but such farms have a life of only 5-10years. Whoever cannot afford it risks losing their land. Each stage of upgrading involves landconcentration and landlessness. Oxfam GB has shown that increasing landlessness in the Mekong isheavily associated with shrimp – in some shrimp growing areas, landlessness is twice as serious aselsewhere. 40 per cent of shrimp farms in Tra Vinh failed in 2001, and in some Mekong regions, 80per cent of farmers are now losing money. Having taken out large loans to start up, failure meansbeing crushed by massive debts with high interest rates and having no means to pay them back.195

Conflict has emerged in some places, such as around Tam Giang lagoon. Dike destruction for shrimpfarming led to salinisation of agricultural land; and much land formerly common property, wherepoor locals accessed the free swimming fish, has now been enclosed. Similar problems haveemerged in Khanh Hoa, with thousands of the locals’ lobster killed by the release of pollutants bynearby tiger shrimp farmers.196

Small shrimp farmers who had invested considerable money into farms in the Hai Phong region weremoved out to make way for a US5 million foreign shrimp venture of American Technologies Inc.The project claims it will create 1000 jobs and boost Hai Phong’s shrimp exports to 2000 tons peryear. However, local shrimp farmer, war veteran Nguyen Hung Van, claimed the compensation paidwas “lower than the investment capital I spent.”197

192 Environmental Justice Foundation, 2002193 Margot Cohen ‘Sweet and sour shrimp’, Far East Economic Review, September 5, 2002194 ‘Mekong Delta rice under assault from burgeoning salt invasion’, Viet Nam News, February 24, 2003195 Tu Giang, ‘Prawn Cocktail’, Vietnam Economic Times, November 2002196 ibid.197 ‘American project to breed major changes for Hai Phong shrimp farms’, Viet Nam News, August 10, 2002

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Despite the hype about SME’s, this is an area that can only lead to such concentration, as attempts topromote quality and efficiency and intensify output are “hampered by the disorganised sprawl ofhundreds of thousands of household producers … They must be taught proper feeding, pond-clearingand pollution prevention methods, yet the task is enormous.”198

Again, one strategy for small producers is to organise cooperatives while not abandoning foodsecurity. To reduce financial risk, “some local communities are pooling resources and developingponds without abandoning their other crops.” In addition, voices are being heard againstintensification. Nguyen Huu Dung, general secretary of VASEP, stressed that “the governmentshould not push production too much, but conduct better planning and ensure sustainabledevelopment.” Rather than encourage farmers to stock their ponds more densely, Dung believes theGovernment should promote low density, low cost organic farming.199 However, such sound ideasmay be drowned out with the frenetic export cash needs of ‘globalisation’.

5.9 Gender and food security, cash crops and diversification

5.9A Women and cash cropsThe coffee research carried out by ICARD (Information Centre for Agricultural and RuralDevelopment)200 gives information on the role of men and women in coffee growing in the CentralHighlands.

It is clear that most coffee plantation work is done by men, though women help their husbands whenneeded, and widows or women with sick husbands have to do all the work themselves. While womenand men are equal in important decision-making when dealing with family assets (the research waswith ethnic minority women practicing ‘matriarchal’ traditions), “most important decisions requiringtechnical knowledge, such as cutting back coffee trees, diversifying crops or borrowing money, arethe responsibility of men.” Men are also responsible for the application of fertilisers and pesticides.

While both men and women are involved in selling coffee, it gives little information regardinggender differences in the scale of such trade, except that men are responsible for loading andtransporting the coffee. This, together with other research showing that men’s businesses are largerscale and take them further afield than do women’s,201 suggest that it is mostly men taking upstronger economic roles in export trade, ie as large middlemen. In fact, male domination of thissphere has played a large role in breaking down ‘matriarchal’ traditions, based on strong collective,self-sufficient household economies.

Women are also responsible for harvesting vegetables and bamboo, mainly used for homeconsumption and small scale local trading. It is women whose task it is to keep food on the table, andare therefore more concerned than men with issues like rice growing and food security. Similarly,according to Oxfam’s rice report, “women’s responsibilities in feeding their families with rice andother foods is likely to remain equally important, or may become heavier with some of the effects ofderegulation, growth, and labour migration. Labour migration of men (in the absence of localemployment opportunities) may place more reproductive and also productive burdens on women.”202

While it is difficult to generalise about all cash crop production, strong evidence suggests that thispattern is common throughout the country – women are more closely tied to maintaining foodsecurity, through rice and other small scale crops (vegetables etc) or raising some pigs or chickens.Men tend to be more responsible for “diversifying” into cash crops like coffee or other crops,applying ‘high tech’ inputs to them and transporting and trading them over wider areas.

198 Cohen, 2002199 ibid.200 ICARD, 2002201 FAO/UNDP, 2002202 Oxfam GB and HK, Rice for the Poor, 2002

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What this suggests is that while men may take decisions about entering such economically riskyareas, the collapse of such schemes affects women more, because they still have to put rice on thetable even when there is no money to buy it with as all land has been risked on temporarily ‘highvalue’ crops.

According to the Oxfam coffee report,203 “women’s burden has increased; they have to worry abouteverything from shrimp sauce, salt and rice. Men, meanwhile, don’t care for such so-called trivialthings. They (women) find life very difficult when they have no money for urgent situations.Children dropping out of school are also women’s great concern. Many poor women told us that hadto stop children from schooling as they have no money ‘even no sandals for their school children.’Girl children also suffer more here – ‘in case families lack money for sending children to school,girls must be the first to stay at home to help with the housework.’ Poor women also reveal that theyhave to take part in all kinds activities to earn more money, such as collecting bamboo sprouts,gleaning coffee (they used to glean coffee for 1 or 2 days after harvesting but now they go everytime).”

Their relationships with their husbands is also a concern. “Financial problems worsen ourrelationships.” Notably, the women pointed out that they never attempt to dissuade their husbandsfrom drinking – according to Oxfam, “there is always some alcohol in every house including thepoor ones that have not enough rice.”

In group discussions and household interviews, ethnic women expressed their priorities to Oxfam.Apart from more “support from the state for children’s education”, the purely economic prioritiesreveal how little faith these women have in get-rich-quick cash crop schemes, calling instead forcredit from Women’s Union or the Bank for the Poor “to develop small scale household economysuch as raising fowls, pigs and growing vegetables and mushrooms” and for local authorities andorganizations to help them improve their knowledge regarding issues like “different techniques ofgrowing vegetables in rainy and dry seasons.”

Regarding large-scale diversification into seafood, “there appears to be a gender difference in thedegree of risk that seems acceptable, women preferring lower risks and returns, and men, generallythe decision makers, preferring high risk-high return activities.”204 This was also clear from Oxfam’spre-CPRGS poverty consultation in Tra Vinh.

A recent survey by the labour federation shows that women working in sea food processing plantsare plagued by health problems.205 In other countries, according to the Environmental JusticeFoundation, women and children have suffered a great deal in shrimp farming, not only fromworking in an unsafe and unsanitary environments, having to walk miles to find drinking waterfollowing the depletion or pollution of local water supplies, but also from serious from landownersand thugs linked to shrimp companies.206

5.9B Women and rice export deregulationAs women are less involved than men in various cash-crop-for export ventures such as coffee andshrimp, and more involved with ensuring basic food security, does this then mean they are likely tobenefit from trade liberalisation in the rice market?

In fact, women-operated farms are on average half the size of those operated by men,207 and womenmake up a higher percentage of those losing land.208 Therefore, in much of the country, they wouldbe overwhelmingly represented in the category of net rice buyers, hence punished by high prices. Inthe Mekong, many may be in the category of marginal net rice sellers, punished by very low prices

203 Oxfam GB/HK, Impacts Of Coffee Prices Under Trade Liberalization, 2002204 Tu Giang, ‘Prawn Cocktail’, Vietnam Economic Times November 2002205 Lao Dong, September 27, 2002206 Environmental Justice Foundation, 2002207 FAO/UNDP 2002208 Truong, 1997 I, “there appears to be a process of land dispossession which is gender-specific,” p93.

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(hence more debt and landlessness), but also not really benefiting when prices are higher – having tosell rice after harvest when prices are lowest, and buy it later when prices are high. As thoseresponsible for buying and selling rice for everyday household food or money needs, women aremost in need of price stability, hence the volatility of trade liberalisation is damaging to women.

As with other poor rice farmers, their lot is thus unlikely to be improved by export deregulationduring the odd years when the world price is high. Looking at what women themselves say, there ismore an emphasis on earning income and improving nutrition through diversifying into small-scalehousehold-based diversification, into animal husbandry for example, alongside rice.209 The fact thatwomen “contribute on average 71 percent of a household’s livestock maintenance resources”210

indicates that directing resources into these areas would be more beneficial to women. Women arealso heavily involved in local handicrafts production.

Chapter 6: Trade Liberalisation and Economic Structure

6.1 ‘Level Playing Field’

Trade liberalisation prescriptions through the WTO and World Bank insist on a “level playing-field”for “all economic enterprises, irrespective of type of ownership.”211 In fact, “only enterprises able toearn profits should survive.” Governments should not give preference to SOE’s in any field.

Discrimination against non-state rural enterprises (eg in credit) makes it difficult to set up ruralprivate enterprises. SOE’s may have monopolies or on input or output prices making the formerhigher and the latter lower than in a more ‘freely competitive’ environment.

Further, the emphasis in World Bank and neo-liberal policy is an ideological preference for theprivate sector, as it is allegedly more efficient than the state sector and is the main ‘engine ofgrowth’. According to the Bank, the “labor/capital ratio of private enterprises is ten times greaterthan that of SOE’s” so they are able to create many more jobs,”212 and “SOEs do not adopt cost-saving measures in transport, storage, marketing, and distribution as quickly as private enterprises dobecause they lack the desire for profit.”213

Many of the criticisms of the functioning of many SOE’s are widely shared, including lack oftransparency, problems of corruption and collusion with local governments. There are SOE’s in areaswhere they are arguably not necessary. However, whether privatisation and allowing SOE’s tocollapse is the best or only way to deal with these problems is another matter - corruption and lack oftransparency afflict private companies at least as much, whether in Vietnam (Minh Phung-Epco) orelsewhere in the world (Enron, WorldCom).

Monopoly pricing often presents problems, yet prices of most inputs and outputs on the domesticmarket are market-determined, not SOE-monopolised. SOE’s have pricing “monopolies” mainly inbasic infrastructure (water, electricity, telecommunications etc), where the State acts to keep priceslower than “market” prices in poor areas. If the market determined everything, such services wouldnever enter poor areas. Regarding SOE domination in exports, see 5.8B, 5.8C.

Small and medium private businesses play critically important role, particularly in an array of areasthat the state does not need to play a dominant role, particularly in the thousands of small-scaleservices traded throughout the country. The small domestic private sector is by far the biggest

209 Oxfam GB/HK, Impacts Of Coffee Prices Under Trade Liberalization, 2002; Oxfam GB 2001.210 FAO/UNDP 2002 p11211 World Bank, 1998 II212 World Bank, 1998 II. The report states that nonfarm (private) establishments and nonfarm household(enterprises) yielding profit/capital ratios of 20 percent and 17 percent, respectively, while the average ratio forSOEs in the same year was 11 percent.213 World Bank, 1998 II

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employer in Vietnam, employing ten times as many workers as the state sector, and 50 times asmany as the foreign invested sector.

Policies to enhance this sector were given a big boost with the Enterprise Law of 2000, and many ofthe restrictions on credit and land-use rights have been removed. The private sector now accesses farmore credit than it did even a few years ago.

However, from the point of view of poverty reduction, some points need to be made which challengethe total ideological bias in favour of private enterprise and against SOE’s.

Firstly, much of the high ‘labour/capital ratio’ is due to paying extremely low wages; according tothe Bank, “income per worker in the private non-farm rural sector is roughly one-fifth that of thestate non-farm rural sector.214 This is particularly relevant regarding gender, as women arecommonly paid less in the private sector. Do some SOEs make less profit (hence are “inefficient”)because they pay more poverty-alleviating wages?

Secondly, the Nghe An Company for Trade and Development Investment in Mountainous Areas, “asa State-owned profit-making business cannot compete well with private traders because of itsbureaucracy and ‘inflexibility’ (e.g. every transaction must have ‘red invoices’, so it cannot ‘avoid’taxes like the private traders here).”215 Does “inflexibility” sometimes mean paying taxes to thestate, which can be used for poverty alleviation? Is this SOE suffering from “unfair competition”from private enterprises? SOE tax avoidance is also a major problem, but this statement suggestsprivate sector avoidance may be higher.

In fact SOE taxes account for 50 percent of all government revenues (up from 40 percent in 1999),joint ventures (between SOE’s and foreign investors) 6.3 percent, while the entire private sector,foreign and domestic (leaving aside 0.7 per cent from agricultural tax), pays only 10.3 percent,216

down from 11.6 percent despite the boom in private sector growth since the Enterprise Law. Thebulk of this comes from FIE’s. Yet the private sector accounts for 60 per cent of GDP.217 Anycollapses of SOE’s while the legal framework for taxing the private sector remains weak will put ahuge hole in state revenues and cause widespread poverty. SOE contributions to the budget this yearare projected to exceed 45 trillion dong ($3 billion).218

Third, while SOE’s often provide better technology to farmers, private operators often ‘compete’ byboosting quantity at the expense of quality. For example, the SOE coffee exporters provided farmerswith technology to produce high quality coffee, which gained good prices for farmers on the worldmarket, and these farmers received better farm-gate prices. Private coffee traders competed bybuying and selling large amounts of low quality coffee, which helped glut the world market.219

Similarly, regarding private tea-processing enterprises, “one of the problems they have caused State-owned enterprises is undercutting, by making the planters harvest five leaves from one bud insteadof three, for bigger profits, tossing quality out the window in the bargain.”220

Fourth, there is not a single crop analysed in this report where poor farmers do not complain aboutexploitation by private traders buying their products – rice, fruit, prawns, salt etc – or selling theminputs like fertiliser (see relevant sections). The problem with the dogma of ‘free competition’among private traders meaning better prices for farmers is that there are always far fewer traders thanfarmers (unless farmers organise into coops); medium-sized traders have transport and storagefacilities, so can easily hoard inputs to force up prices, while poor farmers have no storage capacityso have to sell immediately, giving traders the bargaining advantage; and poor farmers usually haveto sell immediately anyway to pay debts and expenses. 214 World Bank, 1998 II215 Oxfam GB/HK Rice for the Poor, 2001216 WB, ADB, 2002, p125, compared to WB/ADB/UNDP, 2001217 Vietnam Economic Times, November 2002, Statistics section.218 ‘Deputy PM calls on state sector to step up enterprise reform’, Viet Nam News, December 16, 2002219 ICARD, 2002220 ‘Tea exporters see chance’, Viet Nam News, September 17 2002

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This occurs even if the State offers higher prices than the traders, because of the difficulty ofreaching every household. “Most salt producers are poor so they want to sell their products as soonas possible even if the price is low, which means private traders make the profits. Last year, althoughthe VNSC offered a good price of 1,000Dong/kg to producers, the company could not purchaseenough for its domestic sales,” according to VNSC Director Nguyen Gia Hung.221 Traders who buycheap, however, hoard large quantities to make a killing when prices recover. One salt trader saysshe has made hundreds of millions of dong of profits from such deals.222 “Their most fervent wish isthat a State firm will purchase their salt at a fair and stable price, so that they no longer have to relyon the private traders who always pay too little.”223

Finally, a fertiliser SOE, the Nghe An Agricultural Material Company, “stabilised the provincialmarket by … subsidizing fertilizers in remote parts from profits gained in other trade.”224 Thecompany “keeps prices in mountainous areas equal to those in lowland districts (normally they arehigher due to transport costs) by providing its own subsidies for bringing fertilizers there (in additionto the government subsidies).” Only an SOE could do this, because it is supposed to have ‘socialobligations’ and is not run only for profit, like a private company. This company is a “monopoly,”controlling 80 percent of the provincial fertilizer market.225 Similarly, the State Lam Son Sugar plant,which has a local ‘monopoly’, has invested massively in local infrastructure, schools and health carecentres, while paying farmers good prices – as they are organised in cooperative groups and thewhole industry has import protection.226 Other examples have been given in this paper (State riceexporters, the State electricity company and so on). It would be worth examining how wide suchnetworks of SOE protection of the poor through cross-subsidisation, special prices and subsidies andinfrastructure development are. It would be in the interests of poverty alleviation for such SOE’s toreceive “discriminatory” treatment in their favour.

6.1A Gender and ‘level playing fields’While few would doubt the important role to be played by SME’s, the prevailing view that they are apanacea for development problems has serious flaws from a gender perspective.

Women account for 70 percent of the labour force in the informal sector, small household tradingenterprises, characterised by “a high degree of fragmentation in the production process with limitedpossibility of skill enhancement, isolation of workers, lack of supportive services, irregular workinghours and remuneration by piecework,” while control over labour and income is rooted in traditionalpatriarchal structures. While such household enterprises offer women many avenues for badlyneeded extra cash, it is difficult to go up the ladder - “men predominate in large-scale trading andbusiness activities,” ie, SME’s, and they “will be in control of the more lucrative and less labourintensive trading activities,” due to greater mobility, and especially with more technologicalapplication.227

The ‘East Asian’ enterprise model reinforces “patriarchal structures through the sexual division oflabour, female unpaid family labour, and male control over family income and skills definitions.”Gender inequality is further enforced by the “growing interlinkages between SME’s into a chain ofsubcontracting from large firms down to the household level.” Efforts to save on labour costs lead to“two different wage systems and contractual norms – the ‘core workers’, professionals with goodworking conditions in management positions in large firms, largely men; and the flexible workers,

221 ‘Salt imports flood local market’, Viet Nam News, April 4 2002222 ‘Big salt shake up for Ninh Thuan’ Viet Nam News, Sept 18 2002223 ‘Can Gio District experiences a salt rush despite very modest rewards’, Viet Nam News ,July 15 2002224 Oxfam GB/HK, Rice for the Poor, 2002, p34225 Moreover, in 1999, of total revenue of 326 billion dong, total profit was 31 billion, of which contributionsto the state budget amounted to 26 billion dong – five sixths of profit – further indicating the usefulness ofhealthy SOE’s to poverty alleviation.226 ActionAid/The Center for Rural Progress, Report on Trade Liberalisation and Sugar, p 40-41, 49-50227 Truong, 1997, I, p 95, 103

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easily ‘restructurable’, occupying “the lower layers of production relations,” often at a contracted outSME level, many of whom are women.228

6.2 Cooperatives and ‘land markets’

The World Bank has exhibited clear preference for the development of large farms via a ‘real landmarket’ over cooperatives, as quoted above. This discussion is rooted in the problems of millions ofindividual farmers having tiny plots.

There is considerable literature showing that small farms are often far more efficient.229 Yet due toVietnam’s population density, many of its plots are too small – an average of 400 square metres perperson in the Red River delta. Two ways to increase ‘economies of scale’ are for individuals to gainbigger plots, or for groups of small farmers to cooperate.

Trade liberalisation brings this issue to the forefront, because to successfully compete on a worldscale clearly does require greater economies of scale.

Larger farms may help some individuals escape poverty, but clearly not everyone can gain moreland. The 113,000 ‘large farms’ represent a miniscule percentage of the rural population (some 12million households) but boast 10 percent of the entire agriculture sector’s earnings.230

They therefore require others losing some or all of their land. Landlessness is clearly associated withpoverty. While some may get jobs on big farms, these jobs are nearly always low paying andunstable, offering work several months a year. Thus farm sizes can only gradually increase as thecountry industrialises and more jobs are available in industry; to create landlessness first would meana dramatic rise in poverty.

In fact, the two regions where private land concentration is most pronounced – the Central Highlandsand the Mekong Delta – are also home to the greatest number of landless people. Levels of povertyin these regions are far higher than their relatively high per capita GDP’s indicate.

Therefore, the government’s preference for encouraging the development of new voluntarycooperatives and informal cooperative groups seems sound. Cooperatives can be advantageous topoor farmers in the following ways:

! They can negotiate better prices for outputs and lower costs for their inputs, hence avoidingprivate traders who dominate the transport, storage and milling between individual farmers andexporters, and between fertiliser companies and farmers, able to drive a hard bargain with poorfarmers who have to sell immediately after harvest

! They can jointly invest in machinery and post-harvest and storage technology, thus saving moreof their crop and being in a better position to store rice to sell at different times of the year

! They can develop the ‘economies of scale’ necessary to be able to both set aside rice land forsecurity while pooling resources to cultivate some kinds of cash crops, rather than farmers ontiny plots having to choose between having rice but no money or throwing everything into arisky cash venture

! They can act as focal points for contracts with exporters, and for introduction of training andtechnology, which is more difficult for large numbers of individual farmers.231

Speaking to the International Support Group of MARD, Brian Doolan, country director of CAREInternational, stressed that cooperatives were in fact “civil society organisations which have an

228 Truong, 1997 II229 Rosset, 2000; Pearce, 2001.230 ‘Farm owners labour for increased growth in VN’s agricultural sector’, Viet Nam News, February 17 2003231 For example, farmers in Binh Tay Cooperative in Tien Giang were provided with rice strains ST3 and VD2for trial. Impressed by the results, the Tien Giang Foodstuff Company has signed a contract to buy up nextyear’s entire winter-spring crop, ‘High-yield rice stitches up contracts’, Viet Nam News, October 23 2002

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important role as a mechanism for connecting farmers with markets, providing support and adviceand for sharing knowledge and resources.”232

6.2A Gender, cooperatives and land marketsThe importance of this issue to gender equality arises from the fact that the old cooperative system,whatever its faults, made women’s labour visible and public in most aspects. The initial erosion ofwomen’s social position was brought on by the shift to a household-based production with householdcontract system and then the collapse of the cooperatives.233 Women bore the burdens of the shift, astheir household centred work – housework, reproductive duties and household-based agriculturalproduction - became more intense and invisible and old patterns of patriarchal control over women’slabour re-emerged.

Land concentration for some means little land or landlessness for others. Women’s farms on averageare half the size of men’s,234 the quality of allocated land is often inferior235 and they are far morelikely to become landless. While the land law itself is officially very equitable, women are oftenallocated less land than men, and therefore have to work it more intensively, due to social andcultural prejudices.236 When unable to produce enough to meet their subsistence and to pay tax, theyend up transferring their land use rights and becoming waged workers on other farms at a far greaterrate than men.237

The “red book” of land certification is registered under the name of the household head, which inpractice is usually a man. While officially, the wife is entitled to half in a divorce in any case, inpractice, the lack of her name has been shown to cause great difficulties and may be another cause offemale landlessness. Thus the drive to ensure both names are on the ‘red book’ as called for by theCPRGS is an important reform.

However, even with such reforms, it is clear that it will not be women who benefit from growingland concentration and ‘big farms’. Double the number of women than men have under 2000 squaremetres of land, while three times as many men as women have over 18000 square metres.238 Even thepossibility that big farms will provide jobs for farm labourers, mostly female, is undermined as suchfarms employ higher technology to compete on the world market.

As cooperatives may be an avenue for groups of poor farmers to compete better, they objectivelyhave advantages for women farmers. However, while the advantages of new cooperatives(voluntariness, democratic decision making) over the old are obvious, their disadvantages from agender point of view include the fact that few of them are yet providing health, education orchildcare services.239 Also, as loose alliances of patriarchal households, specific incentives may benecessary to facilitate women taking on leadership roles, or setting up their own cooperatives. Thewhole area of women and new cooperatives is a relevant area of research.

6.3 Agricultural Planning

Another aspect of current government agricultural policy is a partial return to agricultural planningthrough encouraging the widespread use of contracts between farmers and processors and exporters.240 This aims at avoiding anarchic situations such as in the sugar industry, where farmers would growsugar and enterprises would set up processing plants without taking into account where the other was

232 Presentation by Brian Doolan to Plenary Meeting of the International Support Group, June 7 2002233 Truong, 1997 I, p83-86234 FAO/UNDP 2002235 Anh 1999, p103236 Binh and Lan, 1996 and Anh, 1999237 Truong, 1997 I, p93238 Isis International, 1999, FAO 1998 figures.239 Truong, 1997 I, p93240 CPRGS p 70

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located, what the capacity (of providing cane or of processing) of the other party was and so on. Thistook place when the ‘world sugar price’ was high, so everyone expected returns regardless ofdifficulties, before the price crash in 1999. The collapse of world coffee prices, and the 2000-01downturn in world rice prices, also had a disastrous effect on many growers.

The Government is now working on a program to involve the MARD, the State Bank of Viet Nam,the Viet Nam Farmers Association, the General Confederation of Labour and the Union of Viet NamScience and Technology Associations. The latter would “conduct research then teach farmers aboutthe latest agricultural technology to help them enhance the quality of products and productivity oftheir operations”, while farmers and enterprises would both be bound by their contracts, theenterprises thus guaranteeing farmers a reasonable price and a stable market, and the enterprisesguaranteed a stable supply.

So far, mainly SOE’s have undertaken long term contracts, which binds them to pay farmers acertain price even if the ‘world price’ drops, “including the Lam Son Sugar Mill, the Song HauFarm, Vinamilk and the Vietnam Cotton Corp … entered into contracts this year for 70,000ha ofrice, 180,000ha of sugarcane, 10,000ha of pineapple and 30,000ha of cotton,”241 while the Northernand Southern Food Corporations have contracted to purchase 800,000 tons of ‘high quality rice’.

Associated with this is the setting up of ‘material zones’ where certain regions would concentrate oncertain crops suited to their geographic conditions; and a new emphasis on quality above quantity toearn higher value for exports rather than glutting the world market.

As the program is new, its results are not yet clear. On the one hand, a more planned approach andthe tying of enterprises to contracts may bring about more price stability for farmers and help avoiddisastrous livelihood collapses due to world price fluctuations. However, certain aspects will beimportant to monitor.

Firstly, will only a privileged few benefit with the poor left behind? Will women farmers beincluded? And given the difficulty of enterprises negotiating with individual farmers, will they signcontracts with cooperatives, or concentrate on ‘big farms’? In fact, most media reports areemphasising cooperatives, and MARD has suggested it wants 100 percent of agricultural produce tobe grown and purchased under contracts by 2010.242

Further, a number of SOE’s (Vietnam Tobacco Corp, Sugar Cane Corp 1, Vietnam Cotton Corp,Vinamilk) have signed contracts to link material zones with poverty reduction in 18 poor villages in10 provinces, including interest free loans for inputs. SOE’s may be capable of such work due totheir ‘social obligations’ and the fact that the state may direct them in this way. However, farmers’experiences with contract farming involving large private companies in other countries have oftenbeen very exploitative, companies offering take it or leave it abysmal prices once farmers havebecome dependent on their inputs (see India in Annex 1). This needs to be guarded against.

Secondly, as the program does appear to be extending to poor areas, will the welcome stress onquality merely translate into the ‘high-yielding’ varieties being pushed by seed TNC’s to theexclusion of traditional varieties and traditional knowledge and push up costs? And will thisemphasise monocultures, or will material zones coexist among a diversity of local crops?

Chapter 7: Globalisation, Privatisation and Services

7.1 Services in general

Trade liberalisation and WTO rules require all service sectors, such as electricity, telephone, water,health education, banking and tourism, to be opened to private and foreign investment withoutrestriction. As the aim of private firms is to make profit, naturally this goes hand in hand with an

241 ‘Govt eyes closely meshed farm sector’, Viet Nam News, December 18 2002242 ‘Enterprises should cut out middle men and sign contracts with farmers’, Viet Nam News, July 12, 2002

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advocacy by the World Bank of “full or partial cost recovery” for most infrastructure. While it haswithdrawn from active advocacy of fees and ‘cost recovery’ in health and education, it heavilypushed such policies for 20 years and Vietnam’s Doi Moi policies in these fields must be seen withinthat context.

As women use services more than men, it is assumed that they will benefit “from the entry ofefficient and more affordable providers of transportation, communications, Internet and financialservices.”243

This statement is highly problematic. ‘Efficient’ services provided by foreign corporations mayindeed benefit middle and upper class women, but education, health, electricity and water will not be‘more affordable’ for people than the cheap services provided by the Vietnamese government,whatever their quality. Rather, their prices being ‘market-driven’, they simply will not even attemptto compete with the State for poor customers who cannot pay high fees. The trend towards two-tiersystems, begun with Doi Moi, will thus intensify.

The government sets very low water rates so that they are affordable; these rates are now underattack as “non-cost effective”. According to “experts”, the low cost means “investing in projects forwater supply appears unattractive in terms of the amount of profits to be made.”244 The likely effectsof privatisation of water are best judged by the Bolivian experience when prices rose astronomically,leading to mass revolt (see Annex 1).

Similarly, regarding electricity, the Government signed an agreement in 1998 with the WB and ADBagreeing to their demands for electricity price increases from 4.8 cents per kw to 7 cents by 2001.245

Thankfully, the government is behind schedule. In fact, this ‘globalisation’ demand contradicts thedemand for cheaper services by enterprises to better compete in exports. So when prices were raised13 percent last year, foreign invested industry was excluded.246

The aim of the rises is to make it more profitable for foreign investors in joint ventures with the Stateelectricity company (EVN) or for private businesses involved in distribution, where the State sets aceiling price. At present, it means that EVN can use this income “to invest heavily in our publicservice obligations – that is, power supply in rural areas.”247 However, if TNC’s come in and set up100 percent foreign power companies in competition with EVN, they will not have any such “publicobligations.”

Telecom price reductions recently announced “apply to international phone calls, package circuitdata switches, frame relays, international channel hire, indirect Internet access, mobile networkconnection and nationwide pager services”248 – but not local calls! While such price drops arewelcome, they have no connection to the poor, least of all poor women, whatsoever. Meanwhile,non-profit postal services have lost their cross-subsidisation by profitable telecom services, as theywere separated so as not to tie down the profitability of the latter. New private competitors willservice profitable urban areas, while the State Telecom company will be left to cover rural areas.

Any study of the access of the poor and women to health and education services since theintroduction of private investment and user fees would show it has declined alarmingly. Fiscaldecentralization potentially makes this worse, as health and education facilities at the grass rootslevel must raise more of their own funds given limited local funds. The use-rate of health services inthe rural areas is low and this trend is likely to continue, while many families consider theopportunity cost of female education too high.249

243 Gender and Trade Network - Asia244 ‘Cheap price of water puts lid on investment’, Viet Nam News, July 5, 2002245 ‘Plug pulled on electricity price hike decision date’, Vietnam Investment Review, May 22-June 7 2002246 ‘Power price hike gains approval’, Vietnam Investment Review, September 30-October 6 2002247 ‘Profitable power behemoth eyes expansion’, Viet Nam News, August 15, 2002248 ‘First telecoms price drop pledge met’, Vietnam Investment Review, July 1-7 2002249 Truong, 1997 I

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At present, the Government is allowing foreign investment within State-controlled ‘monopolies’ inownership of basic electricity, telephone and water infrastructure, and allowing private players totake part in the service end. The ‘donors’ have not demanded total privatisation at this stage,knowing Vietnam would resist. However, the demands of the BTA and WTO mean 100 percentforeign owned companies will be able to enter these sectors in several years. More ominously, theirrules ban the State from “giving preference” to its own services over private or foreign players, evenin health and education, using wording that can be interpreted as banning state funding altogether!250

7.2 Credit

The Vietnam Bank of the Poor (VBP), part of the Vietnam Agriculture Bank (VBARD), and theWomen’s Union (VWU) are active at lending to the poor. VBP and VWU provide loans withoutcollateral requirements. By 1999, total state credit had been provided to 5.9 million households,about half the rural households in the country, of which 2.7 million were poor, mostly provided byVBP. Most is at the subsidised interest rate of 1 percent or less per month. Though a DFID studyconcluded that “VBARD does not seem to be excluding credit-worthy poor households (ie thosewith asset collateral)”,251 consultations with the poor reveal problems of classification of poorhouseholds.

Women have considerably less access to credit than men.252 Inadequacy in loan policy was identifiedby Binh and Lan253 who showed that women, especially heads of households, were limited in termsof available labour and therefore their ability to create value, and so are unable to satisfy loanconditions, particularly collateral for mortgage.254 Even VBP’s non-collateral lending discriminatesagainst women in implementation.255 Therefore, most lending to women comes from the Women’sUnion.256

Trade liberalisation means a number of things.257 Firstly, the entry of foreign banks into rural credit.It is difficult to see how foreign banks, chasing big money, are likely to be of any help to ruraldwellers, except large farmers.

Secondly, the right of foreign banks, and enhanced ability of local banks and creditors, to trade landmortgaged by indebted farmers. This is put up as a way to help farmers get loans, whereas ittransparently aims to help banks seize and sell land, leading to greater landlessness. Consultationswith the poor reveal that many do not want to take out loans precisely because of fear of losing land;258 and key recommendations of the poor and particularly women were for loans without collateral.259

Land loss may be particularly likely with credit for certain hair-brained cash crop schemes.

Finally, the removal of interest rate caps, and the abolition of subsidised credit which is consideredunsustainable by the World Bank and others, though this was clearly refuted in a DFID study.260 It isasserted that subsidised rates mean low accumulation of credit, and therefore it does not reach thepoor, but people with connections, or better off people who can repay. It is clearly true that there areserious implementation and poor classification problems, and this is an area that needs much work,though reports are mixed and many show that a reasonable amount is reaching the poor. However,abolishing concessional credit and allowing only ‘market’ rates is the surest way to ensure the poorare completely excluded. This author has not found a single source in which the poor themselves, 250 BTA (quoting WTO regulations), ‘Trade in Services’.251 DFID, 2001252 FAO and UNDP, 2002253 Binh and Lan, 1996.254 Women’s obstacles to access to credit were also analysed in Huong, 2000, and Loan, Nhan, Fyles, 2002255 Loan, Nhan, Fyles, 2002, p141, 143.256 Ngoc, 2002257 The following all recommendations of the World Bank in Advancing Rural Development, 1998 II258 Oxfam GB/HK Rice for the Poor, 2002; Christopoulos, 1997, p204259 Pre-CPRGS poverty consultations in Ha Tinh (ActionAid), Tra Vinh (Oxfam GB), Vinh Long (CRS)260 DFID, 2001, p9

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and particularly women, did not support concessional credit, fear higher (“near commercial”) interestrates, or advocate even lower or zero rates.261

In the CPRGS, the Government pledges to maintain subsidised credit for the poor and “createconditions for targeted groups, with priority given to women, to access credit at reasonable rates”,but “in the longer term” to shift to “improving access” by simplifying procedures and providingtraining “rather than apply current preferential system (p72).”

Chapter 8: Agriculture, Industry and Globalisation

Loss of protection for Vietnam’s industry, through tariff slashing and abolition of qualitativerestrictions may result in large-scale collapses, with thousands of workers losing their jobs. Manymay be in the state sector, which dominates heavy industry. The current SOE reform program iscalled ‘equitisation’, meaning selling a part of the SOE’s shares to private individuals andcompanies, with the state maintaining either majority or significant minority shares. This aims toinject more capital into SOE’s and to make them more profit-driven and hence more ‘efficient’, andso more able to survive.

Yet the equitisation program itself will mean the shedding of an estimated 250,000 workers by 2005,262 and more later, including women and rural dwellers. So far, the Government’s program has beenmild, equitising or dissolving SOE’s with only a small fraction of SOE capital, and workers have notbeen laid off. The Government’s redundancy package is quite good, but workers still prefer to keeptheir jobs. As such, the ‘slowness’ of equitisation is largely seen to be due to resistance from workersand the refusal of the Government to force their hand. This is the major point of IMF/WB criticism.

Yet even rapid equitisation may not necessarily rescue many from collapse. Collapses of large SOE’swould result in significant losses to the state budget. Moreover, with profit becoming the onlymotivation for an equitised SOE, it is unclear what would happen to the ‘social obligations’ ofcertain SOE’s.

Liberalisation advocates however see this as positive. They argue that the reduction of Vietnam’sheavy industrial base will make more credit available for private SME’s in agriculture, non-farmrural enterprises and light export-oriented industry, which will create more jobs than those lost.Moreover, cheaper imported manufactured goods will reduce prices for many consumer goodsbought by rural dwellers and hence reduce poverty,263 and also reduce the prices of plant, machinery,and other purchased inputs for local industry and agriculture.

The reality is not nearly this neat. Firstly, according to a great mass of media reports and analysis, itis precisely SME’s that will be most vulnerable to trade liberalisation, due to their small scale andtheir limited application of technology.264 It will largely be the bigger “medium” rather than “small”enterprises that will survive, alongside big private capital, ‘efficient’ SOE’s and FIE’s.

Secondly, protection currently benefits not only ‘heavy’ industry. According to the World Bank’sown figures,265 agricultural products and light industrial products in labour intensive areas are just ashighly protected as ‘heavy’ industrial products (eg, ceramics 127%, textiles 132%, foodstuffs 105%,vegetable and fruit canning 100%, tea and coffee processing 90%, electronic products 65%, while

261 Consultations with the Poor in Ha Tinh, Tra Vinh, Vinh Long; Isis International, 1999; TWG, CFAW,MARD, Resources for Sustainable Livelihoods: Targeting Female-Headed Households, WARI Workshop; andcountless other sources.262 World Bank/Asia Development Bank, 2002, p 71263 World Bank, 2002, p96-98264 ‘SME’s face integration challenges’, Vietnam Investment Review, December 9-15, 2002; ‘WTOmembership signals SOS for SME’s’, Lao Dong, August 7, 2002; and masses of other reports265 World Bank, ADB, UNDP, 2001, p25

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cement is only 90% and equipment and machinery a mere 12%). Hence all sectors will be hit, thegrowing, labour intensive, electronics sector in particular.266

Moreover, the last point tells us something about ‘price falls’ due to cheap imports reducing poverty.If all these prices come down, it means the poor will lose jobs in light industry and jobs, income orfarms in agriculture. Hence relative to falling incomes of the rural poor, ‘cheap’ imported goods willbe more expensive

For the country as a whole, this could mean a big expansion of the currently widening trade deficit.The country will have to import more ‘heavy’ and other industrial goods (fertilisers, cement, steel,paper, electronic goods, motorbikes etc) with low revenue from exporting agricultural products withfalling prices.

Further, the anti-localisation demands of the BTA and the WTO will further reduce local jobs inparts production. A good example is the dispute between the Government and the foreign investedmotorbike manufacturers during 2002 over the latter not buying local parts or investing in localparts’ production, which some observers suggested could “jeopardise the nation's entry into theWTO.” Also, in October 2002, the Government decided to exclude imported assembled motorbikesfrom AFTA cuts, announcing that they will be subject to tariffs of 100 per cent.

The jobs at stake are not simply a few “heavy” industrial jobs for a few workers, but rather thisconcerns the whole area of linkage with the local economy. An article in Vietnam Investment Review267 reveals an entire craft village, Rua village in Ha Tay, devoted to production of motorbikecomponents. Such rural traditional craft villages employ large amounts of rural labour, both full-timeand part-time, particularly as they are based on low levels of technology but on the traditionalcooperative structures among the small household businesses of these villages.

Moreover, when the government backed down, local motorbike assemblers protested, because, theyclaim, “local manufacturers pay more to the state budget and make a greater contribution to thelocalisation of motorbike parts by investing in local cooperatives and accessory makers.”268

A recent poverty alleviation workshop run by the DFID in Hanoi, based on three years of research,debunked most of the standard myths regarding SOE’s, FIE’s and domestic private enterprises thattrade liberalisation dogma is based on269. The most interesting conclusions were that:

FIE’s create remarkably few jobs, as they are the most capital intensive area, more so than SOE’s(38.8% compared to 30.9%), and because they rely very heavily on imported components, ratherthan buying or investing locally

The greatest number of SOE’s are moderately capital intensive (38.7%), that is, they have investedin technology to become more ‘efficient’, but not to the extent of eliminating too many jobs, likeFIE’s. In ‘dynamic’ areas, such as garment, they are just as good at creating jobs as are privateenterprises – but with better wages and conditions, including for women

While there is a greater percentage of private enterprises than SOE’s or FIE’s that are highly labourintensive (33.2%, 30.5%, 30.1%), the largest percentage of private enterprises are in fact highlycapital intensive, more so than SOE’s (35% compared to 30.9%). This indicates that as private‘SME’s’ become large, they invest in technology to compete on the world market and so shed jobs

The main reason for the very low growth in employment in the 1990’s was not the concentration onso-called ‘capital-intensive SOE’s’, but the elimination of jobs due to greater efficiency,particularly in the sectors most involved in global competition, which is hence likely to continueunder the ‘efficiency’ and technology requirements of globalisation. SOE’s were relatively lessguilty than either FIE’s or ‘competitive’ private firms

266 ‘Tariff drop threatens electronics sector’, Vietnam Investment Review, June 22-28, 2002267 ‘Parts of a bigger picture’, Vietnam Investment Review, November 4-10, 2002268 ‘Local motorbike assemblers at odds with quota allocations’, Phap Luat, November 7, 2002269 See particularly Jenkins, 2002

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Domestic private firms benefit considerably more from high levels of protection of over 100 percent than do SOE’s or FIE’s (56.7% compared to 46.3% and 43.7%) and hardly any operate underlow levels of protection of under 30 per cent (4.6% compared to 12.7% and 23.7%). Thus small,labour intensive private firms will be massively hit by further trade liberalisation

Thus, SOE’s and capital intensive sectors cannot be said to be especially benefited by protection, andnor can alleged resource allocation in their favour be said to be a brake on employment growth. Thatdoes not mean that there is no room for resource reallocation away from heavy industry towards lightmanufacturing and rural based industries, for example. However, this shift has been going on foryears. According to the World Bank’s most recent figures, only around 40 per cent of credit is nowgoing to SOE’s,270 equivalent to their current weight within GDP and state revenues. Domesticprivate enterprises now account for 29 per cent of credit, up from zero in 1990. There is still a way togo, but while SOE’s in certain sectors (eg sugar) are among the worst debtors, private enterprisesnow account for 40 per cent of total outstanding loans.271

SOE concentration in heavy industry, which requires far more capital, makes these figures all themore noteworthy. Yet the very fact that light industries require relatively little capital then becomesan argument against virtually any investment in heavy industry, as far more jobs can allegedly becreated with the same amount of money. For example, referring to the Hoanh Bo cement projectbeing developed, it “needs $230 million investment and will create only 7000 jobs. If that moneywas invested in 230 small to medium enterprises involved in handicrafts, aquaculture and foodprocessing, then each million dollars would generate jobs for some 3000 people,”272 ie, a total of700,000 jobs.

Regardless of the accuracy of the economics of this assertion, it contains a number of problems.Firstly, if each ‘SME’ employed 3000 workers, they would not be SME’s, but large firms. Secondly,as we have seen, larger firms invest more in technology precisely so as to compete on the worldmarket, and so shed jobs. Thirdly, it is one thing to argue for a relative shift in resources, and anotherto argue against any heavy industrial project because the same amount of money would allegedlycreate hundreds of thousands of jobs. The reality is that the number of jobs is restricted by the abilityof the world market to absorb products, particularly in competition with other developing countries,and without causing gluts and price drops - it is not endless.

The three industries noted are:

Aquaculture, which has been growing very rapidly in any case. The environmental, food securityand world market limitations to endless growth have been noted above.

Food processing, which has also been growing rapidly, its value rising from 34 per cent of totalagricultural production in 1990 to 50 per cent now,273 and exports rising 20 percent per annum.However, as noted above, processed fruit exports are, with certain exceptions, not expanding rapidlyand face fierce competition; and the quality and efficiency demands of import markets mean it islarger private or state processing plants that will survive globalisation, not ‘SME’s’.274 The country iscurrently suffering from over-investment in sugar processing; all analyses show that large sugarprocessing plants, with big capacity, are those able to produce cheapest and so survive, while it is theSME’s that will have to close under the impact of trade liberalisation.275

270 World Bank and ADB, 2002, p30271 ‘Banking credit revamp continues’, Interview with Central Bank governor Le Duc Thuy, Viet Nam News,November 21 2002272 ‘Free trade zone forces rethink’, Pham Chi Lan, vice president of the Vietnam Chamber of Commerce andIndustry, Viet Nam News, January 18, 2002273 ‘Food processing industry gearing up to serve domestic and foreign markets’, Viet Nam News, May 14,2002274 ibid; ‘Hanoi to overhaul food processing sector’, Viet Nam News, August 1, 2002275 MARD/ISG, 2002, p17

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Handicrafts are crucial to rural well-being, currently employing 10-13 million rural dwellers in2000 craft villages, 80 per cent in the north, and 40 per cent in the Red River. Such craft villages arebased on small household and semi-cooperative structures. They sell both to the domestic market andaccount for increasing export revenues – up 40 per cent in 2002 to around $300 million.276 Many arelargely run by women artisans.277 Yet all accounts suggest that they “are hampered by poorinfrastructure, low marketing and management capacity, a shortage of capital and unsustainabletechniques” as they take part in global competition.278 This means that a ‘modern, efficient’handicraft industry is one where ‘SME’s’ get bigger, drive out rivals, destroy traditional craft villagestructures, invest in higher technology and shed massive numbers of workers to better compete inexports and with cheaper imports.

8.1 Textiles/garments

The main new export industries to replace ‘inefficient’ heavy industrial SOE’s and absorb retrenchedworkers and land-starved farmers are garment and footwear. Given that many workers in retrenchingsectors are men, and that garment and footwear industries employ a large percentage of women, acrude analysis may even see this as a gain for women. Some 69 percent of the textile and 81 percentof the garment workforce is female.279

Garment exports have undergone massive expansion. In the first half of 2002, exports of garmentsand textiles topped US$900 million, a 1.5-fold rise over 2000.280 With the BTA, garment exports tothe US rose fifteen times, to $598 million, by October 2002,281 compared to the same period theprevious year, though there have been 10 and 20 per cent falls in exports to the EU and Japan,Vietnam’s traditional markets.

However, these exports may not continue to rise at the same rate. The US is set to impose quotas onVietnamese garments sometime in 2003,282 and quotas will reflect current levels. As withaquaculture, US garment producers have rushed to demand quotas on Vietnam (and China) as soonas market share approached the one per cent mark. On the other hand, once all world garment quotasare phased out in several years, Vietnam will be competing with developing countries from aroundthe world, many currently restricted by quotas, for the US market, and for the EU market, whereVietnamese products are already sold under quota. By 2005, China is expected to be supplying 48per cent of garments and textiles across the world.283 In addition, as with most developing countryproducts, garment and textile prices have dropped 15-20 per cent in recent years.284

This will mean far fiercer competition, and according to experts from the Dutch Consulting andPromotion Organisation (CBI), “local garment and textile industry will never be able to competewith the estimated 20 million garment and textile distributors in the world unless they remedy fiveimportant deficiencies,” these being reliance on imported raw materials, ineffective corporatemanagement, outdated technology, low productivity and reliance on quotas.285

The first deficiency will be enforced by trade liberalisation as dumped US cotton imports makeVietnamese cotton farmers ‘uncompetitive’. The others point to the same problems noted for otherindustries. That is, small, labour intensive SME’s with ‘outdated technology and low productivity’will be driven out, while larger private, SOE or FIE firms will stay afloat by investing in technologyand hence reducing their ‘labour-intensiveness’.

276 ‘Handicrafts rise above export slump’, Viet Nam News, September 27, 2002277 Vietnam News Service, October 21 2002278 ‘Handicrafts supplant farming in north’, Viet Nam News, December 18, 2002279 Thoburn, Ha, Hoa, p28280 ‘Garment industry urged to shape up’, Viet Nam News, July 30, 2002281 Folkmanis, 2003282 ibid, and a mass of other reports.283 ‘Garment sector told to tighten operations’, Vietnam Investment Review, December 9-15 2002284 ibid285 ‘Garment makers blasé over integration challenges’, Lao Dong, October 24,2002

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To date, most US contracts have been won by large state companies. SOE’s have been just asdynamic as other sectors in garment, creating large numbers of jobs, investing in new technology andgreatly improving product quality, belying many of the stereotypes about ‘moribund’ SOE’s.286

Wages and conditions in SOE’s are far superior to those in private or foreign firms, with averagewages in the former around one third higher than in the other sectors.287 In fact, the strength of stateenterprises, the expansion of the industry, and the strength of Vietnam’s trade unions and labourlegislation means that Vietnam’s alleged ‘comparative advantage’ of ‘cheap labour’ has beenundermined, with wages considerably higher than in Indonesia, almost as high as China,288 and notfar below Thailand, countries with much higher GDP per capita.

While almost 90 per cent of workers in SOE’s and 80 per cent in FIE’s have labour contracts, only40 per cent do in private enterprises, indicating that many of the latter will compete by employingpart-time, casual workers without contracts, job security or minimum legal conditions. Of HCMC’s249 factories, 197 do not provide social security for their employees – mainly the private plants.289

While workplace accidents have declined in SOE’s, they have risen “between 18 and 31 percent inprivate enterprises.”290

While the SOE conditions are good news for workers, they are not for ‘globalisation.’ Fiercercompetition will mean cutting jobs or cutting wages and conditions of workers. According to DeputyMinister of Labour, Invalids and Social Affairs, Le Duy Dong, Vietnam’s entry into AFTA and theBTA have caused “fierce competition and increased cutbacks” in the sector. While SOE conditionsare still far superior, the global competitive drive appears in many cases to be reducing SOEconditions to the private sector level.291

However, lower wages are making it difficult to attract the skilled workers needed in the industry.The Sai Gon Garment Company, for example, reported spending 1.1 million Dong to advertise butcould hire only one worker,292 while others report massive staff turnover. Therefore, it is mainly themost unskilled rural migrants taking up low paying jobs, particularly in the private sector. While thismay be good for rural employment, particularly for women, the poor are only ‘participating inglobalisation’ by getting the lowest wages, and then being retrenched due to increasing ‘efficiency’.

Despite terrible conditions, evidence shows that many women do benefit socially and culturally fromearning wages in industry and achieving a measure of independence outside the patriarchalhousehold.293 However, the following factors make it dubious that women can gain much from thegarment industry:

Firstly, real independence is difficult because women’s wages are lower than male wages in theindustry.294 Rural poverty and landlessness force poor rural women to accept any jobs offered tothem at any wage,295 so they are over-represented in work places where conditions are poor andwages are low, and in highly unstable jobs. In the informal garment sector, many women work forwages as low as 300,000 Dong ($20),296 including overtime. Indeed, ‘feminisation’ of labourgenerally means casualisation, shift to part-time and piece work rates, and ‘flexibility’ in hiring and

286 Thorburn, Ha, Hoa, 2002287 Navdi and De Armas, 2002288 Thoburn, Ha, Hoa, p24289 ‘Decree aims to settle job disputes’, Viet Nam News November 14, 2002290 ‘Negligence causes increase in work accidents: union’, Viet Nam News, January 15, 2002291 Kabeer, 2002292 ‘Garment industry urged to shape up’, Viet Nam News, July 30 2002293 Sakanond, 1998/99, quoting Jayati Ghosh, Centre of Economic Studies and Planning, Jawaharlal NehruUniversity in New Delhi294 Hoa, Sutherland, Thoburn, 2002, p19295 Anh and Hung, 2000, p100296 ‘Loneliness haunts young workers’, Viet Nam News, January 16, 2003

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firing, particularly as multinational and local companies engage in an international ‘putting out’system of contracting out to informal household enterprises at hugely exploitative rates.297

Secondly, despite the myth of female employment gains, women in fact will be the first to sufferfrom lay-offs both in male-dominated ‘heavy’ sectors and in garment due to investment in newmachinery,298 as they occupy the lower skill jobs and are under represented in managing and decisionmaking positions. The skill levels of women are on average only 40 percent those of men.299 Indeed,there is a clear recent switch towards hiring a greater percentage of men for this reason.300 Womenare also less confident than about finding new work once retrenched due to their lower skill levels.301

Thirdly, new employment opportunities have tended to provide access to women of pre-reproductiveage for whom the cost of pregnancy, maternity leave and child care are not yet applicable - thesecosts make slightly older women unable to compete with men.302 Their average age is 25, comparedto 35 for non-garment workers.303 State withdrawal from services like child care provision mean suchservices may be provided by the enterprise – something much less likely for private enterprises, thusleaving women with less time to work, or having to increase their work load to pay for childcare.

Fourth, conditions are often horrendous for women’s health. Many work considerable overtime,some 50 per cent of it involuntarily. Sixty five percent work more than 10 hours a day,304 well inexcess of the 300 hours annual maximum. They work in harmful and toxic conditions andenvironments, a recent survey by the Labour Confederation showing that 38 per cent of womenworking in garment factories suffer pulmonary diseases, 32 percent from gynecological diseases, and11 per cent suffer from arthritis.305 Trade liberalisation leads to great intensification of work,especially in private companies.306 Violent crime and rape are reported around industrial zones.

Finally, as NIC experiences show, “the incorporation of women in export-led industries ischaracterised by an intensified use of female labour followed by quick disposal, creating a constantand rapid turnover of women workers for whom alternatives must be found.” The lack of alternatives(and perhaps also low wages) has led to poverty generation and indentureship, which have drivenwomen into prostitution, international trade of sexual slavery, and the mail-order brides market.”307

This link between garment, indentureship and sex-work is one well worth researching, even more sogiven the booming HIV rates and their dramatic poverty inducing effects.

Annex 1: International Implementation of Neo-Liberal Policy Prescriptions

Below are a number of brief case studies of countries that have gone through similar processes oftrade liberalisation where results have not been promising from the point of view of povertyalleviation.

Bangladesh: Private sector import liberalisation, hybrid rice and ‘international best practicemicro-finance. In 1998, following devastating floods, Bangladesh opened seed imports to privatecompanies. Advanced Chemicals Industries Ltd (ACI) imported hybrid rice from Hybrid RiceInternational, a subsidiary of Proagro (Aventis), the world’s largest agrochemical company.Supported by IRRI, ACI and a large micro-credit agency, the Bangladesh Rural Advancement

297 Gender and Trade Network - Asia298 Thoburn, Ha, Hoa, p28299 Hoa, Sutherland, Thoburn, p21300 Hoa, Sutherland, Thoburn, p46301 ibid p24302 Truong, 1997 I303 Kabeer 2002304 ibid.305 Lao Dong, September 27, 2002; Global Standards, 2002306 Hoa, Sutherland, Thoburn, p24307 Truong, 1997 I, p111

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Committee (BRAC), sold the seeds. BRAC aggressively promoted Aalok 6201 (the hybrid rice), andfarmers had to accept credit at very high interest rates, and accept the proprietary rights of ACI. Onlyafter the harvest were they informed that they were not allowed to save seeds for the following yearsharvest. Yet despite its high cost and chemical input requirements, Aalok 6201was struck by blastinfection and gave little or no yield advantage over local inbred varieties. In some cases now, poorfarmers are even given loans part in cash and part in hybrid seeds, even if they have no land to plantit.308

China. “While the barrier to China’s agricultural exports is rising, thanks to WTO-approvedloopholes, foreign agricultural imports arere flooding into China. Despite the small improvement inrural income last year, it wasn’t enough to revive rural consumption which has been extremely weak,sometimes even declining, since 1997.”309 Analysts have warned that China’s “mainly inefficient andsmall-scale agriculture sector could be devastated as tariffs fall following WTO entry. Evidenceincluded Chinese imports of 300,000 tons of edible oils in June alone.”310

As for unemployment, “China's increased industrial efficiency had altered the number of new jobscreated by economic growth. Whereas China once created 1 million new jobs for every 1 percent ofGDP growth, it now creates only 700,000 to 800,000 new jobs. In addition, changes in agriculturalpractices have triggered a population movement away from the rural and toward the urban areas.”311

Between 1998 and 2001, over 25.5 million people were laid off by the state enterprises. Thegovernment has predicted unemployment will triple in the next four years. It launched a program in1997 to provide a basic living allowance for urban residents who lost out in the reforms. By February2002, 13 million people depended on it for survival.312

The agricultural liberalisation that Indonesia has undertaken in recent years, due to its commitmentsto the IMF and WTO, has led to an explosion of food imports of staple crops. It is now one of theworld's top rice importers, importing at least 10% of its rice (from 33,000 tons in 1985 to 3.2 milliontons in 1995). Between 1995 and 2001, sugar imports increased by 45% and soya imports by 40%.Overnight, the livelihoods of millions have been destroyed.313 Tens of thousands of workers fromsugar plantations and sugar mills launched a coordinated strike and protest action throughout Java inSeptember 2002. “The workers were protesting the anarchic dumping of imported raw and processedsugar onto the Indonesian market following the implementation of new policies mandated by theWTO and IMF. The import tariff on sugar was dramatically reduced, so imported sugar can sell onthe market for between 2400 to 2650 rupiah per kilogram. However, production costs for local sugarare around Rp3100-3200, so farmers bear a loss of Rp550 per kilogram. On September 24, anotherround of sugar worker demonstrations took place, organised by sugar worker and peasantorganisations. Hundreds of farmers from the Peoples Front for Agrarian Renewal (FRPA) joined thedemonstration.”314

In Thailand, where more than 300,000 people have lost jobs in 1997-98, trade union activists claimthat a majority of retrenched employees are women. Between 1980 and 1990 illiteracy rates amonggirls were cut by half. In the past year following the crisis, the elementary school drop-out rate hastripled and a majority of the drop-outs are girls.315 Meanwhile, domestic producers of agriculturalproducts, such as palm oil, soya oil, soya residues, coconut meat, onion, garlic, potatoes, raw silkthread and skimmed milk powder, are unprotected. Their products are being outmoded by imported

308 GRAIN, 2000309 Eva Cheng, ‘CP welcomes capitalists into its ranks’, Green Left Weekly, November 20, 2002310 ‘WTO entry hurts Chinese farmers’, Viet Nam News, August 6, 2002311 Stratfor ‘Acknowledging Economic Inconsistencies’, January 5, 2003312 IBON Features 2002-57, August 23, 2002313 Zanny Begg, ‘World's poor at the mercy of the WTO’, Green Left Weekly, November 20, 2002314 Max Lane, ‘Indonesia: Crisis begins to unite workers and peasants’, Green Left Weekly, October 2, 2002315 Sakanond, B, 1998/99

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goods. The number of family-based farms are declining,316 becoming part of a contract-farmingsystem linked up with big agricultural corporations.

In Sri Lanka, when the domestic market was opened to minimum levels of agricultural imports atlow tariffs, it led to a sharp drop in rural employment with around 300,000 jobs losses in theproduction of onions and potatoes.317

India. Trade liberalisation policies turned India from being self sufficient in edible oils to being theworld’s largest importer in just five years.318 Rural employment in the period 1993-94 to 1999-2000grew at the very low annual rate of less than 0.6 percent per annum, lower than any previous periodin modern history, and only one-third the rate of growth of rural population. Urban employmentgrowth, at 2.3 percent per annum, was also well below that of earlier periods. Per capita food grainconsumption declined from 476 grams per day in 1990 to only 418 grams per day in 2001, and evenaggregate calorific consumption per capita declined from just over 2200 calories per day in 1987-88to around 2150 in 1999-2000.

Land reforms (which put a ceiling on land holdings) “are being undone to allow corporatesuperfarms for luxury production for international markets. Massive displacement of farmers istaking place. Corporatisation of agriculture is leading to new poverty for small farmers as unequaland unfair contracts lock them into a new forms of bondage. Farmers of Punjab who were contractedby Pepsico to grow tomatoes received only Rs.0.75 per kg while the market price was Rs.2.00. Firstthe farmers rejected Pepsico and now Pepsico has abandoned Punjab and sold its tomato processingplant to a subsidiary of Levers.319

In Cambodia “the current policy entails raising levels of rice production for export and promotion ofprivatised imports of seeds, fertilisers, pesticides. Rice imports are also promoted to increasecompetitiveness within the internal market. In recent days, Cambodian rice cannot compete withThai rice even though Cambodian rice is better – people cannot think about quality when they cannotfeed all their family. Through this process, rural women will have less access to land for subsistencefarming, greater difficulties in continuing to work as farmers, and limited opportunities for findingother work. This will lead to the dislocation of families and communities, a more disadvantagedposition for women, a widening gap between the rich and the poor and a continuation of thefeminisation of poverty.320

From 1995-99, the Philippines imported 4.74 million metric tons of rice and 1.18 million metrictons of corn; despite corn self-sufficiency, corn farmers are now exposed to US corn imports sellingat half the real cost of production. Rice imports in 1998 increased by 2.2 million m.t., one quarter thecountry’s rice consumption. This was due to crop conversion and land-use conversion policies on 3.1million hectares of rice and corn land, shifting to ‘cut flowers’ and vegetables for export, affecting 3million peasant women and women farm workers. Women finding jobs as agricultural workers earn$2.34 (117 PhP), whereas men earn $2.77 (139 PhP). Two parents working as agricultural workersearn 132 PhP less than government pegged 388 PhP daily cost of living in rural areas. Ruralresistance to these policies met with repression – last year Karapatan Alliance for Human Rightsdocumented 614 cases of human rights violations, including many horrific murders

According to Government figures in 1997, one in five factories employ contractual, casual, part-timeworkers, especially in foreign invested and export oriented enterprises. In Mactan export processingzone, about half the factories employ labour contracting, and most workers are women, often havingno security of tenure, earning on piece rate basis, forced to do overtime.

316 Isis International, 1999317 Isis International, 1999318 Madeley 2000319 Shiva, 2001320 FAO/FWP, 1999 cited in Womyn’s Agenda for Change/Oxfam Hong Kong, Cambodia, 2000

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Power was privatised, leading to a 100% increase in electricity rates. Water was privatised in 1997,the big beneficiaries being giant multinational monopolies, and water rates have increased. 981schools and universities increased fees in 2002, and major hospitals are now slated for privatisation.

There are 8.6 million Filipino migrant workers, of whom 68 percent are women. Large numberswork in domestic help and ‘entertainment’ industries, despite so many horror stories. 25-35000Filipinas are trafficked every year around the world (National Commission on the Role of FilipinoWomen), accounting for half of all South East Asian women trafficked annually; 200,000 Filipinasare working in the overseas sex trade.321

‘Structural adjustment’ in Mozambique since 1987, with privatisation of over a thousand formerlystate-run companies, has led to 120,000 workers losing their jobs. In 1999-2001, some 20,000 jobswere lost. Contrary to the promises of the new owners, many privatised factories did not acquire newequipment - a third of the 1,470 privatised are now paralysed or semi-paralysed, and owe backwages. The worst debacle was the cashew processing industry. Here the World Bank demanded thatthe industry be stripped of protection. Mozambican cashews were exported raw to India, while oneby one, the local processing plants, starved of raw material, closed down. Ninety per cent of the morethan 10,000 people who used to work in cashew processing have lost their jobs.322

Kenya, which was self-sufficient in the 1980s, is now importing 80% of its food. “In 1992, EUwheat was sold in Kenya at a price 39% cheaper than it was purchased from European farmers. In1993, it was 50% cheaper. In 1995, Kenyan wheat prices collapsed through oversupply.”323

In Argentina, one of the world's top exporters of agricultural commodities, and which producesenough food to meet the needs of its 37 million people twice over, 52 percent of the population ispoor and 20 percent is living in the most abject poverty.324 Several years ago, it was touted as amodel of neo-liberal development under IMF guidance.

The public water system in a large city in Bolivia was sold in 1999 to the California-based TNCBechtel, under World Bank threats to withhold debt relief and development assistance. Bechtelimmediately imposed huge rate hikes. “Families living on the local minimum wage of $60 per monthwere billed up to 25 percent of their monthly income. The rate hikes sparked massive citywideprotests” that the Bolivian government used armed force against. More than a hundred people wereinjured and one 17-year-old boy was killed. In April 2000, Bechtel abandoned the project, but is nowsuing Bolivia for $25 million!325

Three years ago Mexico imported half a million tons of rice. It now imports 7 million tons. WhileMexico's corn economy is being destroyed, it is importing yellow corn from the US, which is used tofeed animals in that country. Mexicans eat white corn which is culturally more appropriate to theirfood system. In 1992, Mexico imported 20% of its food. In 1996 it was importing 43%. One of everytwo peasants is not getting enough to eat. In 18 months since NAFTA, the intake of food hasdeclined by 29%, 2.2 million Mexicans have lost jobs and 40 million are in extreme poverty.326

The phase-out in January of most agriculture tariffs under NAFTA will accelerate the consolidationof Mexican farming into large agro-industrial enterprises, depriving many peasants of theirlivelihood and forcing them to migrate to the cities or the United States. Since early 2001, Mexicohas shed more than 250,000 manufacturing jobs as U.S. and other foreign firms have shiftedoperations to China, where labor costs are between one-third and one-half lower.327

321 GABRIELA, 2002322 Mozambique Information Agency, 2002.323 Feyissa, 2001, Third World Network324 Valente, 2002325 Earthjustice, 2003326 Carrera, 2001327 Stratfor, 2002

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