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Input Policy in Vietnam- Nguyen Man Hai

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  • 1. The Role of Inputs Policy in Transforming Agriculture in Vietnam ByBy Nguyen Manh Hai,Nguyen Manh Hai, Central Institute for Economic Management (CIEM)Central Institute for Economic Management (CIEM) Hanoi, VietnamHanoi, Vietnam ReSAKSS-Asia program,ReSAKSS-Asia program, International Conference, September 25-27, 2013International Conference, September 25-27, 2013 Siem Reap, CambodiaSiem Reap, Cambodia
  • 2. The key research questionsThe key research questions • What is the role of input policy in a transformingWhat is the role of input policy in a transforming agriculture in Vietnam?agriculture in Vietnam? • What are the key policies affecting agricultural inputWhat are the key policies affecting agricultural input use and what specific policies were implementeduse and what specific policies were implemented during food and input crises ?during food and input crises ? • How these policies should be improved to promoteHow these policies should be improved to promote efficient fertiliser and seed use ?efficient fertiliser and seed use ? • What are the main policy issues of agricultural inputWhat are the main policy issues of agricultural input markets in Vietnam especially those for fertiliser andmarkets in Vietnam especially those for fertiliser and
  • 3. GDP and sectoral growths ofGDP and sectoral growths of Vietnam, 2005-2012Vietnam, 2005-2012 4.02 3.69 3.76 4.07 1.83 2.78 4.01 2.72 10.69 10.38 10.22 6.11 5.52 7.7 5.53 4.52 8.48 8.29 8.85 7.18 6.63 7.52 6.99 6.42 8.44 8.23 8.46 6.18 5.32 6.8 5.89 5.03 0 2 4 6 8 10 12 2005 2006 2007 2008 2009 2010 2011 2012 Growth(%) Agriculture-forestry-fisheries Industry-Construction Services GDP Source: Demonstration based on data from GSO
  • 4. The role of agricultural inputs in VietnamThe role of agricultural inputs in Vietnam • Agricultural inputs in agriculture play a crucial role in the sectorAgricultural inputs in agriculture play a crucial role in the sector development: Substantial effects on price, supply sources,development: Substantial effects on price, supply sources, productivity, and agricultural production costs.productivity, and agricultural production costs. • Among agricultural inputs in Vietnam, fertilisers and seeds are theAmong agricultural inputs in Vietnam, fertilisers and seeds are the most important, due to:most important, due to: • i) Vietnam is a large rice producer in the world. Cultivation share isi) Vietnam is a large rice producer in the world. Cultivation share is relatively large in total agricultural product accounting for 72.1% inrelatively large in total agricultural product accounting for 72.1% in total agricultural output value in 2011.total agricultural output value in 2011. • ii) Fertiliser cost accounts for major share of total rice productionii) Fertiliser cost accounts for major share of total rice production cost (34%). Seed quality/types has a strong correlation to rice (andcost (34%). Seed quality/types has a strong correlation to rice (and other crop) productivity;other crop) productivity; • iii) Efficient use of fertiliser is important avoiding over-consumptioniii) Efficient use of fertiliser is important avoiding over-consumption or lack of fertilisers;or lack of fertilisers;
  • 5. Broad cropping pattern and input demandBroad cropping pattern and input demand • Major crops: Rice, maize, sugar-cane, cotton, coffee, tea, peanut,Major crops: Rice, maize, sugar-cane, cotton, coffee, tea, peanut, soyabean of which rice and maize are two main dominant crops.soyabean of which rice and maize are two main dominant crops. Rice is the largest staple crop accounting for 60% of total annualRice is the largest staple crop accounting for 60% of total annual crop area, while the corresponding figure for maize is 9%.crop area, while the corresponding figure for maize is 9%. • Demand for fertiliser and seed is high for these crops.Demand for fertiliser and seed is high for these crops. • Fertiliser supply sources in 2012:Fertiliser supply sources in 2012: + Urea: Domestic supply of 78%; Import: 22%+ Urea: Domestic supply of 78%; Import: 22% + NPK: Domestic supply of 90.4%; Import: 9.6%+ NPK: Domestic supply of 90.4%; Import: 9.6% + DAP: Domestic supply of 68.5%; Import: 31.5% ; Imports: 100% of+ DAP: Domestic supply of 68.5%; Import: 31.5% ; Imports: 100% of SA and potashSA and potash • Seed imports: 70-75% hybrid rice seed; 60% of hybrid maize seed;Seed imports: 70-75% hybrid rice seed; 60% of hybrid maize seed; 80% of vegetable seed.80% of vegetable seed.
  • 6. Key policies affecting agricultural input useKey policies affecting agricultural input use • Land policies:Land policies: • ““Contract 100” policy applied in 1981: collective cooperativesContract 100” policy applied in 1981: collective cooperatives assigned agricultural land to groups of farmers or farmers;assigned agricultural land to groups of farmers or farmers; production is under the management of cooperatives and theproduction is under the management of cooperatives and the farmers are paid based on earnings in rice production output and onfarmers are paid based on earnings in rice production output and on the number of contribution days in three stages of the productionthe number of contribution days in three stages of the production process at the end of season.process at the end of season. • 1987 Land Law and Resolution No. 10-NQ/TW in 1988, farmer1987 Land Law and Resolution No. 10-NQ/TW in 1988, farmer households were recognized as self-controlled economic units forhouseholds were recognized as self-controlled economic units for the first time. The Resolution No. 10 was a real “renovation” policythe first time. The Resolution No. 10 was a real “renovation” policy in agriculture issuing new regulation on piece-work contractin agriculture issuing new regulation on piece-work contract • Land Law in 1993: Land was re-allocated to farm households forLand Law in 1993: Land was re-allocated to farm households for stable use and this encourages farmers to expand the cultivationstable use and this encourages farmers to expand the cultivation land area. The land law was revised in 2003 with more freedom forland area. The land law was revised in 2003 with more freedom for land users.land users.
  • 7. Major input policy changesMajor input policy changes • Before 1988 (economic reform): Fertiliser and seed prices wereBefore 1988 (economic reform): Fertiliser and seed prices were fixed by the government. Domestic fertiliser market was fragmentedfixed by the government. Domestic fertiliser market was fragmented by administrative borders, imports from former Soviet Union andby administrative borders, imports from former Soviet Union and Eastern Europe by protocols. Seeds supplied to cooperatives andEastern Europe by protocols. Seeds supplied to cooperatives and state farms according to state plans.state farms according to state plans. • 1989-2003: + Fertiliser and seed prices basically determined by the1989-2003: + Fertiliser and seed prices basically determined by the market but SOEs were still dominant the domestic markets;market but SOEs were still dominant the domestic markets; • + Abolishing market fragmentation of administrative borders.+ Abolishing market fragmentation of administrative borders. • + Imports from all other countries and Provincial People Committee+ Imports from all other countries and Provincial People Committee entitled to verify and select a list of capable fertiliser importingentitled to verify and select a list of capable fertiliser importing companies. Before 2001: fertiliser import quotas applied. After 2001:companies. Before 2001: fertiliser import quotas applied. After 2001: the quotas were only oriental, technical barriers applied.the quotas were only oriental, technical barriers applied. • + Joint-ventures with foreign partners for fertiliser investment (1989-+ Joint-ventures with foreign partners for fertiliser investment (1989- 1998); Private fertiliser companies were set up (1999 onwards);1998); Private fertiliser companies were set up (1999 onwards); Since 1989, investments from all sectors including state, private andSince 1989, investments from all sectors including state, private and FDI were encouraged in seed sector, especially since 2003.FDI were encouraged in seed sector, especially since 2003.
  • 8. Key policies affecting agricultural input useKey policies affecting agricultural input use Current effective fertiliser policiesCurrent effective fertiliser policies • Fertiliser prices were basically determined by the market. However,Fertiliser prices were basically determined by the market. However, fertilisers were subject to price stabilization (2012 Price Law)fertilisers were subject to price stabilization (2012 Price Law) • MARD releases the List of fertilisers which are allowed to beMARD releases the List of fertilisers which are allowed to be produced, traded and used in Vietnam.produced, traded and used in Vietnam. • The importation of fertilisers which are not in theThe importation of fertilisers which are not in the tested/experimented “List” must be agreed by MARD.tested/experimented “List” must be agreed by MARD. • Individuals and organisations are responsible for the quality of theirIndividuals and organisations are responsible for the quality of their fertilisers imported or exported. MARD is responsible for statefertilisers imported or exported. MARD is responsible for state management on fertilisers including, among others, organisation ofmanagement on fertilisers including, among others, organisation of undertaking researches and application of science and technologyundertaking researches and application of science and technology in fertiliser use and production, control, inspection and treatment forin fertiliser use and production, control, inspection and treatment for violations in organic fertiliser production and use. MOIT has similarviolations in organic fertiliser production and use. MOIT has similar roles with respect to mineral fertilisers;roles with respect to mineral fertilisers;
  • 9. Key policies affecting agricultural input useKey policies affecting agricultural input use Current effective seed policiesCurrent effective seed policies • Seed prices were determined by the markets.Seed prices were determined by the markets. • Seed regulations are stipulated in Seed Ordinance No. 15/2004/PL-Seed regulations are stipulated in Seed Ordinance No. 15/2004/PL- UBTVQH11: National and foreign organizations and individuals areUBTVQH11: National and foreign organizations and individuals are entitled to operate on plant seeds if they meet required conditions.entitled to operate on plant seeds if they meet required conditions. • Regulations on seed copyrights and labels, on testing, inspectionRegulations on seed copyrights and labels, on testing, inspection and new varieties approval and protection were stipulated andand new varieties approval and protection were stipulated and updated over time.updated over time. • MARD often promulgated lists of plants/seeds permitted inMARD often promulgated lists of plants/seeds permitted in production and trading. Seed quality, in principle, is accredited byproduction and trading. Seed quality, in principle, is accredited by 2011 Circular No. 79/2011/TT-BNNPTNT and thus, in principle,2011 Circular No. 79/2011/TT-BNNPTNT and thus, in principle, should be better controlled.should be better controlled.
  • 10. During 2008 food and fertiliser crisesDuring 2008 food and fertiliser crises 0 100 200 300 400 500 600 700 800 900 Jan-08Apr-08 Jul-08Oct-08Jan-09Apr-09 Jul-09Oct-09Jan-10Apr-10 Jul-10Oct-10Jan-11 US$/ton Domestic rice price Rice FOB price NPK price • The 2008 food and fertiliser crises had significant adverse effects in Vietnam although it lasted in very short time • Temporary rice export ban in Vietnam: substantial reduction in domestic rice prices especially from April to July 2008. This led to a lower fertiliser domestic demand and prices especially from August 2008 to the end of the year. • There was no significant fertiliser/input policy responses creating difficulties for farmers. The government policy: quick responses for domestic rice price stabilisation but slower in responses to fertiliser market. Source: Own demonstration based on MARD’s data
  • 11. The policy formulation andThe policy formulation and implementation processimplementation process • There is still inefficiency in policy formulation procedure in VietnamThere is still inefficiency in policy formulation procedure in Vietnam including agricultural policies.including agricultural policies. • Fertiliser and seed policies: often promulgated at central level, whileFertiliser and seed policies: often promulgated at central level, while local/provincial people committees could issue implementationlocal/provincial people committees could issue implementation guidance: Lack of effective mechanism to gather opinions ofguidance: Lack of effective mechanism to gather opinions of affected parties.affected parties. • The policy implementation is a top-down process: lack of resourcesThe policy implementation is a top-down process: lack of resources both financial and human may result in improperboth financial and human may result in improper implementation/enforcement of the policy.implementation/enforcement of the policy. • Unclear (or too general) articles in higher legal documents mayUnclear (or too general) articles in higher legal documents may cause some consequences: i) lower legal documents will leancause some consequences: i) lower legal documents will lean toward being advantageous to state management agencies; ii)toward being advantageous to state management agencies; ii) Lower legal documents are allowed to “stipulate” some articles inLower legal documents are allowed to “stipulate” some articles in higher legal documents.higher legal documents.
  • 12. Key agricultural input policy issuesKey agricultural input policy issues and recommendationsand recommendations • The agricultural land: shrunk due to industrialization and urbanization:The agricultural land: shrunk due to industrialization and urbanization: good land planning and post-acquisition policies demandedgood land planning and post-acquisition policies demanded • Agricultural land tenure (20 years) is too short making less motivationsAgricultural land tenure (20 years) is too short making less motivations for better use and conservation of the land.for better use and conservation of the land. • There should be a market for agricultural land in Vietnam due to slowThere should be a market for agricultural land in Vietnam due to slow agricultural land accumulationagricultural land accumulation • The scattered and overlapping responsibilities among ministriesThe scattered and overlapping responsibilities among ministries • The enforcement mechanisms for both fertiliser and seeds policies areThe enforcement mechanisms for both fertiliser and seeds policies are still weak and penalties for quality violations: not strong enough. In-still weak and penalties for quality violations: not strong enough. In- transparency and information asymmetry in domestic fertilizer marketstransparency and information asymmetry in domestic fertilizer markets result in too many “intermediate” distribution agencies.result in too many “intermediate” distribution agencies.
  • 13. Thank you very muchThank you very much for your attention !for your attention !

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