Đề tài Developing an Agricultural Research and Development Priority Framework for Vietnam Economic & Policy Sub-Sector Workshop

Developing an Agricultural Research and Development Priority Framework for Vietnam Economic & Policy Sub-Sector Workshop Data and Information Sheets: Economic & Policy Research Opportunity (EPROs) EPRO 1: COMMODITY RESEARCH, MARKET ANALYSIS, FORECAST & POLICY ANALYSIS EPRO 2: NATURAL RESOURCES AND RURAL ENVIRONMENT MANAGEMENT EPRO 3: RESEARCH, TECHNOLOGY DEVELOPMENT AND TRANSFER DELIVERY SYSTEMS FOR AGRICULTURE AND RURAL DEVELOPMENT EPRO 4: SOCIAL SECURITY FOR RURAL PEOPLE AND SUSTAINABLE POVERTY REDUCTION EPRO 5: CLIMATE CHANGE EPRO 6: RURAL DEVELOPMENT EPRO 7: IMPACT OF INTERNATIONAL ECONOMIC INTEGRATION AND MARKET ACCESS TO THE VIETNAM AGRICULTURAL TRADE July 2010 2EPRO 1: COMMODITY RESEARCH, MARKET ANALYSIS, FORECAST & POLICY ANALYSIS DATA SHEET ARDO DEFINITION 1.1 National Goal or Purpose To develop the capacity for market analysis and forecast, to improve competitiveness of major Vietnamese products in domestic and international markets and to use that capacity as a basis for providing commodity policy advice, including food security, to Government. 1.2 Research Scope 1. To construct an effective database and monitoring system for market information and for food security for strategic agriculture commodities. 2. To built a group of agricultural commodity experts to do commodity market analysis and forecast, especially for policy analysis of MARD, as well as to provide consulting service for local authorities and business organizations 3. Conducting in-depth analysis and demonstration model of market change at macro level in short term and long term, in order to help in forecasting and planning work of MARD, local authorities and agri-business organizations. 4. Provide timely information and awareness of commodity analysis results via policy discussion forum, market outlook conference, publications to assist the public and private sector to develop stable and profitable markets. 1.3 Coverage The priorities are for the domestic and export products are rice, coffee, rubber, and aquatic sector (shrimp and catfish). To a lesser extent and mainly for the domestic market pig production could be a lower level priority. Introduction Vietnam is an agriculture based country with more than 73 per cent of its population residing in rural areas. In the past few years, owing to the special attentions of the Party and the Government, together with the reform (Doi Moi), rural livelihood has been gradually improving and the poverty rate decreasing. Vietnam is now the second largest rice exporting country in the world. Rice is the main crop produced in Vietnam and its level of production is closely linked to farm incomes and rural development. Rice production plays an important role in food security in Vietnam. During the economic reform process, the agricultural sector has grown at more than 4.5% annually for many years. Vietnamese agriculture has been shifting to commodity production based on the exploitation of advantages on diverse biological resources. Food, aquaculture livestock, vegetable, fruit and industrial crop production has grown significantly. Food production (including paddy, corn, cassava and sweet potato) has increased annually. In the period from 1996-2001, total food production has increased from 31.48 million tons to 39.43 million tons (equivalent 5.05% per year). In 2002-2006, production rose further from 43.1 million tons to 48.9 million tons (2.69% per year). At the same time there has been increased 3competition for land and water uses between rice production and industrial crops or other uses as industrialization continues in the Vietnamese economy. Between 2001 and 2007, more than 500,000 hectares (1.2 million acres) of farmland had been converted into industrial parks. So far in 2008, 125,000 hectares of rice fields have been lost. According to MARD, the total export turnover of agricultural sector up to October 2008 is estimated to reach 13.6 billion USD, up 25.7% over the same period last year, in which agricultural products reached 7.4 billion USD, up 42.5%; fisheries reached 3.8 billion USD, up 24.2%; forestry products reached USD 2.46 billion, increased by 16.7%. In the same time, the agriculture sector had 5 products with turnover of over 1 billion USD (fisheries, rice, forestry products, coffee and rubber) out of 11 products that reached value of over 1 billion USD of the country. However, agricultural markets in 2008 also witnessed many unexpected changes. During mid year, world food prices increased sharply and stayed at a peak of 300% over the same period of 2007 and then dropped. For example export rice prices reached a high of around US$800/ton in 2008 resulting in sharp increases in domestic rice to a high of about 20,000VND/kg (or US$1.3/kg) in late April 2008. During 2009 export prices have declined. A similar situation happened with meat products and industrial crops such as rubber, to early 2009, the price of rubber (1,500 USD per ton) decreased almost 50% compared with the peak in 2008 (2900 USD per ton). The stabilization of food prices is important because rapidly increasing food prices will reduce purchasing power. In 2007 food prices have increased 14.6%. In early 2008, food prices increased sharply, leading to the share of food reaching 43% in total household expenditure. Among Vietnam’s agriculture products, rice (15%), aquaculture (30%), coffee and rubber account for 80% of total annual export turnover. Together with meeting domestic demand, agricultural exports have also grown quickly, both in quantity and value. For the past two decades, Vietnam has become one of the world’s biggest agricultural exporting countries, including rice, coffee, cashew nut, pepper, rubber, tea, aquaculture, etc. Exported agricultural and forestry products account for 30-35% of total agricultural production. Exporting ratios by sectors are about 20% for rice, coffee 95%, rubber 85%, cashew nut 90%, tea 80%, and pepper 95%. Some Vietnamese agricultural products have confirmed their leading positions in the world market (e.g. rice, coffee, cashew nut, pepper, and fishery products). Markets for Vietnam’s agricultural products have been expanded, besides traditional markets (e.g. China, ASEAN, Russia and Eastern European countries); Vietnam has initially entered such potential markets as Middle East, EU, the USA and Africa. Vietnam is moving quickly to market economy and integrating into global economy. Demand and supply of agricultural products fully depend on market forces, rather than on top-down decision as it was in central State economy. The change from planning based on centrally derived production targets to producers, processor and exporters planning based on market opportunities will take time, but without reliable market forecasts is unlikely to happen. Thus, it is necessary to have study on market analysis and forecast, which would assess comparative advantages, then provide guidance and create motivation for market forces to restructure the production and market system based on comparative advantage. While moving to market economy, Vietnam’s agriculture faces a lot of challenges, especially the issue of supply surplus in many agricultural commodities e.g. coffee, dairy, vegetable, sugarcane etc. Farmers are very vulnerable to price fluctuations caused by over-supply or poor quality and in the absence of sound market forecasts cannot adjust their production systems to minimize risk 4of poor returns and capitalise on improving market opportunities. Many commodities (e.g. fish products like shrimp and catfish, rice, coffee, pepper, and cashew nut etc.) fail to forecast market demand and unexpectedly face surpluses or deficits. Farmers often follow short-term market signals, shifting among commodities, causing big losses for themselves and for the economy. As a result, investors have difficulties and uncertainties in investment in processing factories, for instance in cases of tea, sugarcane, cassava and dairy processing. Experience of leading countries in agriculture development e.g. USA, EU, Australia and Japan provide valuable lessons. The USA has Economic Research Service (ERS) under Ministry of Agriculture; Australia has Australian Bureau of Agricultural and Resource Economics (ABARE) directly under the Government with thousand of staffs. Especially ABARE, which has 300 experts work on management and quality control issue of products. Countries like USA, EU and Australia focus on quality control and increasing value added of agriculture products rather than to stimulate supply. Forecasting also includes prediction of total crop production, based on reliable on-farm data. Collection of farm-based data could provide information on the health (input and output costs, profitability, investment levels etc) of the agriculture sector. Analysis of this data and information could provide valuable inputs into advice on policies for the agriculture sector including policies relating to food security, both at the national and local level. The five-year plan on agriculture and rural development (2006-2010) indicates an action plan with focus on the development of high value commodity crops, livestock products and forestry plants toward yield and production improvement. The plan also clearly states orientation on growth rate, production, added value, the share of agricultural commodities, etc. in order to push the development of these commodity sectors. This is considered the key task in the action plan on the agricultural sector. Therefore, it can be said that commodity development with key solutions of policy reform, institutional, organizational and public investment improvement are the first important assignments of the sector. This project really matches with the above target. Operational Environment 3.1 Political and Legislative Environment Apart from Decree No. 7 issued at the central government meeting in July 2008 on the target of developing comprehensive agriculture orienting to modern, sustainable and massive commodity production, Vietnam has not yet issued policies or comprehensive strategies on a particular agricultural commodity or on the investments in commodities related to future or stable or sustainable markets. Policy intervention is mainly through related policies which may directly and indirectly affect the commodity sector. These include 3 major policy groups on production support, land and trade and supporting agriculture production policies such as science and technology, credit and agricultural extension. Much of the legislation relates to Vietnam’s obligations to international agreements. These are important, but they relate to the ability to trade (export and import) rather than what to trade and how to empower producers, processors and exporters of Vietnamese product to be competitive while being profitable. Examples of related policies include: Policies on production support  Decree No. 225/1999/QD-TTg dated December 10, 1999 on crop and forestry varieties and breeding during the period 2001 – 2005 and Decree No. 17/2006/QD-TTg dated January 20, 2006 on continuous implementation of Decree 225/1999/QD-TTg till 2010 5 Decree No. 129/2003/ND-CP (2003) relates to exemption of agricultural land use and the latest Decree 115, 2008 allowed the abolishment of irrigational fees.  Decree 05/2005/QD-BNN dated January 20, 2005 sets standards of agricultural commodities or agricultural products which are produced and traded under MARD’s supervision.  Decision No. 391/QD-TTg (April 2008) on the review and inspection of the management and use of land for the five years to 2010, with a focus on rice fields in particular.  National Food security of Vietnam and vision to 2030: (Pending)  Government’s Decree of Rice Land Management: (Pending 2008) Land policies The Land Law 2003 stimulates that all land area belongs to the entire people, representing by the State with five main responsibilities: (i) Formulate land use zoning and land use plans; (ii) Decide land use quota and duration; (iii) Grant land use rights to land users; (iv) Collect taxes related land use; and (v) Determine land prices. Land users are allocated with land for long-term and stable use and are granted seven rights of land use: transfer, exchange, lease, inheritance, mortgage, donation, and use of land as capital contribution. Besides, land users have to (i) farm appropriate crops and rotations; (ii) pay attention to land fertility maintenance; and (iii) pay taxes and fees on agricultural land. Current taxes related to agricultural land in Vietnam include (i) tax on agricultural land use, (ii) tax on land use rights transfer, and (iii) tax on land over the land limit. In 2003, the Government promulgated a legal regulation exempting most farmers from paying agricultural land use tax until 2010. Specifically, the following land policies are related to agricultural production:  Decree 09/2000/NQ-CP of the Government issued in June 2000 stipulates the stabilization of about 4 million ha of irrigated for rice production and ineffective rice land types (compared to the national average level) are allowed to transfer to other more effective crops.  Decree No. 03/2000/NQ-CP of the Government dated February 2, 2000 on farming economy stipulates policies on land allocation, lease, transfer of land use right in order to encourage cultivated land concentration, agricultural development toward farming scale, facilitating the development of material production for focused commodities. Trade policies To meet requirements of the Agreement of Agriculture (AoA) the Vietnamese Government has issued the following policies aimed at formulating a certain discipline in agricultural trade and support policies and avoiding the use of policies that distort the world trade of agricultural products.  Decision No. 1042/QD-BTM issued by the Ministry of Trade on 29 June 2007 on lifting bonus for export achievement. This decision is to implement Vietnam’s WTO commitment to remove export subsidies.  Law No. 20/2004/PL-UBTVQH11 on 29 April 2004 on anti-dumping of goods imported into Vietnam.  Decision No. 02 /2008/QĐ-BCT dated 21 Jan 2008 on the plan on development of machinery industry for agriculture in 2006-2015 with vision towards 2020.  Decision No. 104/2008/QD-Ttg dated 21 July 2008 on export tariff on rice and fertilizer. 6 Decree No. 39/2006/QĐ-BTC dated 28 July 2006 on tariff on export and import goods. This decree mentions all kind of goods imposed with export tariff, of which only some agricultural products are included in compliance with AoA. Sanitary and Phyto-sanitary Agreement (SPS): Relevant international organizations or WTO members are responsible for the definition of SPS measures and Vietnam is obliged to meet importing countries SPS requirements. The following legal documents and policies have been issued:  Decision No. 04/2008/QD-BNN on 10 January 2008 on the functions and cooperation of Vietnam’s SPS enquiry points.  Law No. 12/2003/PL-UBTVQH11 dated 26 July 2003 on food sanitary measures.  Decree No. 149/2007/QD-TTg dated 10 Sep 2007 on the implementation of a national plan for food sanitary measures.  Law No. 18/2004/PL-UBTVQH11 dated 29 April 2004 on animal health service.  Decree No. 33/2005/ND-CP dated 15 March 2005 on the implementation of Law No. 18/2004/PL-UBTVQH11  Law No. 36/2001/PL-UBTVQH10 dated 25 July 2001 on plant protection and inspection. Technical Barriers to Trade Agreement (TBT): The TBT agreement is relevant for technical regulations covering all specific characteristics of a product, such as size, design, operation, package, and label. Decision No. 0975/QD-BTC issued by the Ministry of Finance on 15 February 2008 is on the approval of a project on technical support after WTO entry- phase 1. This is to evaluate current status and give solutions to obstacles and difficulties in implementing WTO commitments on distribution, franchise, goods inspection, logistics, and trade agencies. Trade related Aspects of Intellectual Property Rights (TRIPS): The agreement obliges members to protect inventions of products and processes. It covers all intellectual property rights with instruments to protect authors, investors, brands and names against imitation and reproduction. Plant varieties and geographical indications relating to agriculture are also covered in this agreement. The following provisions oblige WTO members to introduce intellectual property rights for plant varieties and geographical indications.  Law No. 50/2006/ QH11 dated 29 November 2006 on intellectual property rights  Decree No. 104/2006/ND-CP dated 22 September 2006 on intellectual property rights for plant varieties, wine and spirits  Decree No. 54/2000/ND-CP dated 13 October 2000 on trade secrets, geography Besides WTO agreements, Vietnam has signed the some regional agreements that can affect agriculture, such as AFTA/CEPT, US bilateral trade agreement, AFTA- China, and AFTA- Korea. All these agreement basically focus on reducing import tariff and other trade and non- trade barriers to bind all members open up their markets for imported goods. General documents at central level relating to agricultural production and export  Decision No. 69/2007/QD-TTg issued by the Prime Minister on 18 May 2007 on the development plan on processing industries for agricultural and forestry products until 2010 and vision towards 2020 7 Decision No. 27/2007/QD-BNN of the Ministry of Agriculture and Rural Development dated 12 April 2007 on management regulations of the national plan on the development and implementation of bio-technologies in agriculture until 2020.  Law No. 05/2007/QH12 dated 21 November 2007 on product quality. This provides regulations on quality of export products in general and binding that all exporters have to follow this law and other international and regional commitments.  Decree No. 151/2006/ND-CP dated 20 December 2007 on regulating national credit for investment and export.  Decision No. 08/2007/QĐ-BTC dated 2 March 2007 on interest for credit for investment and export. In general, besides positive effects, policies related to agricultural commodities are mainly situational and passive, often issued at time of crises (rice crisis, coffee, food safety, animal inputs, etc.). Commodity policies are mainly support for production, and specific regulations relating to Vietnam’s international agreements which impact largely on access to global markets, agricultural subsidies, product quality and specific sanitary and phyto-sanitary requirements. There is little comprehensive policy along the chain of a specific commodity: planning, forecast for investment, production organization, input materials, production, processing, trade, quality control, risk management, and support for end consumers. Policy formulation process is reactive and is generally not on a scientific basis and does not have proper consultation of many relevant stakeholders such as policy makers, researchers, private sector, farmers, etc. As a result, market forecast of agricultural commodities as the basis for policy formulation is really necessary. Economic Environment Planning based on production areas and yields with a focus on exports risks creation of an imbalanced sectoral structure. Farmers are encouraged to invest in strong export commodities such as coffee, pepper, cashew nut, rice, and tiger prawns. Weaker sectors such as livestock, poultry, and forestry products, with large and often unfulfilled domestic markets do not seem to receive sufficient support. Investment in strong export sectors are large often without due regard to markets. Supply, often of low quality, has quickly exceede