Impacts and solutions to higher competitiveness of agricultural products when Vietnam entered WTO 

Vietnam’s WTO membership has had impacts on all economic sectors of Vietnam. Regarding the agricultural sector, Vietnam’s WTO membership has both positive and negative impacts on Vietnamese agri-products. 

The following positive impacts include:

Thanks to the renovation policies, Vietnam’s agricultural production has recently dramatically developed and become the leading exporter of some key agricultural products, for instance rice, coffee, cashew, pepper and rubber. However, many products could not find their consumption because of extreme “supply exceeding demand”. WTO membership is an opportunity to expand Vietnamese markets for agricultural products since Vietnam shall be treated as equal as other WTO members (quota removal, tax reduction and some other provisions of MNF) 

Being WTO member, domestic producers shall have opportunities to make access to raw materials and equipment at a lower price and high quality in order to serve agricultural production. When opening its economy, agricultural material inputs shall be exempt from taxes and import quotas. Of which, many inputs are impossible to be produced in Vietnam, but if possible with limited quantity and quality and high cost, for instance farming tools, seedlings and new varieties, pesticides, vaccines, fertilizers and cattle feed. Therefore, domestic agricultural producers can make access and select agricultural material inputs at lower prices apart from other home-made materials available in the country. This contributes to lower the production cost and higher production and business efficiency and higher competitiveness.

 Having entered WTO, resources of the economy shall be exploited, transferred and utilized in a free and prompt way in areas as needed. Thereby, the total demand of the economy and purchase power of the society shall increase at rapid pace, and then the markets for commodities including high quality agri-products and services shall also be expanded. Aiming to keep up with the increase in the market demand of Vietnamese agriculture, it is required to focus on renovating processing technology and improving quality of agri-products in parallel with changing the animal and crop structure, diversifying agricultural products, creating new products and meeting the society’s various demands.

 In addition to the aforesaid positive impacts, in case where Vietnam’s agricultural sector has not yet well-prepared, it is sure that the WTO membership can not protect Vietnam from negative impacts on the competitiveness of agricultural products, incomes and employment of millions of farmers because of the following reasons: 

Agricultural products from developed countries with higher quality and lower price would invade the Vietnamese market when protection barriers are to be removed.

 When becoming WTO member, we shall have to open almost all markets, adopting import tax of less than 15%. The spreading invasion of cheaper agricultural products from developed countries and regional countries whose agricultural production is more advanced than ours is extremely concerned. The competition would be increasingly fierce in terms of price and quality. Furthermore, Vietnamese agricultural products mainly include unprocessed products. The problem is how to help such products to make access to international markets.

 The linkage among target groups involved in domestic agricultural production and business is very poor, leading to disadvantages in international markets. Although the State have encouraged strengthening the linkage among farmers, scientists, managers and enterprises for many recent years, this linkage is , in fact, still loose. In case whenever the world market demand for a certain product it is prevented from export-processing manufacturers who have not enough raw materials. Or in case where farmers gain bumper crops, the prices jump down due to increasingly higher supply beyond the procurement of export-processing enterprises.

 Therefore, impacts on agricultural production would be various and reversible when Vietnam entered WTO. Opportunities and challenges of various commodity categories and production and business entities are very different. Therefore, aiming to increase efficiency and competitiveness and ensure an efficient WTO membership, it is supposed to consistently take the following measures:

 Firstly, it is required to dramatically shift the agricultural economic structure into the commodity-driven agriculture and goods categories with high competitive advantages. This shall be a market-driven agricultural production and supply, contributing to promoting the self-motivation and autonomy of target groups involved in production and business.  Now that “farmers” shall have to shift the production structure of some commodity categories with competitive advantages in an attempt to bring in higher economic efficiency. However, the direction shall be given by State competent agencies, which facilitate local producers. The question is to enhance capacity of agencies in charge of economic forecast and planning.

 Secondly, the development of processing industry and subordinate industries is needed, helping the agricultural sector increase the value of Vietnamese agricultural products. Agriculture always walks behind the national economy, leading to lower economic efficiency and added valued of agricultural labor force. Therefore, on the one hand, direct consumption markets shall be expanded. On the other hand, the processing industry and subordinate industries serving the agricultural sector shall be further developed in order to maintain and increase the value of agricultural products. The development of agri-product processing industry shall be in line with the centralized material zoning, focusing on the interactions in specific benefits between stakeholders and clear market directions.

 Thirdly, it is required to apply advanced science and technology to agricultural production at a large scale aiming to increase productivity, quality and reduce production cost. This is a key task to improve the competitiveness of commodities in general and of agricultural products in particular.

 Vietnam shall have to face up many obstacles in the application of advanced science and technology to agriculture, in which the burning problems are lack of investment fund and poor perceptiveness of farmers.  At present, Vietnam’s agriculture is required to put emphasis on the application of biological technology and creation of new high yield and high quality seedlings; and introduction of processing technology, post-harvest technology and modern farming method using less natural resources and more environment-friendly. The programs for irrigationization, mechanization and electrification of agricultural sector and rural areas shall continue to be implemented. In which local people shall be direct target groups involved in adopting and enjoying the aforesaid achievements.

 Fourthly, it is necessary to strengthen the linkage among “4 stakeholders”, to establish associations of commodity categories and renovate land relations in rural areas, establish the networking; and specialize and connect among production with processing, business, export and import in order to ensure standards for certain chains of custody as required by international markets based on the proper distribution of profits and risks of all stakeholders for all phases, especially targeted at benefits of farmers. In addition, it is required to promptly set up associations of agricultural and rural commodity categories in order to control internal competition and have a common strong voice to protect common benefits of the State when Vietnam entered WTO. On the other hand, it is supposed to continue renew land relations in rural areas with the direction that land area shall be concentrated to reach to large-scale production in combination with job re-assignment via transfer of labor force from agriculture and other sectors in rural areas.

 Fifthly, it is advised to do marketing by means of developing and disseminating brand name and establish distribution channels of agricultural commodities. This activity  plays an increasingly role in the market economy in an attempt to control the unbalance between supply and demand, contributing farmers to consume agricultural products fast, bringing in economic efficiency and revenues for re-production.

 Sixthly, it is necessary to use protection barriers as regulated by WTO in order to protect domestic production as required.

  It is apparent that “play ground” WTO is not possible to be fair when there exists a big gap of the economic development among WTO members. Having entered WTO, such a developing country as Vietnam shall have to face up more challenges than opportunities, thus it shall make greatest efforts to minimizing disadvantages to further develop the Vietnamese agricultural sector.                                  

 Vietnam’s animal husbandry – Opportunities and challenges when having entered WTO

 Animal husbandry has become a focus of Vietnam’s agricultural sector. While GDP of animal husbandry found it difficult to reach the 2-digitial growth rate in 1960s and 1970s of the 20^th century, it reached 24.4%, 23% and 22% for the different periods 1991- 1995, 1996 – 2000 and 2000 – 2005 respectively despite serious epidemic for the period 200-2005.

 For the period 2001 – 2005, the meat production increased by 9.8% on average, including 10.89% of pork and 9.81% of beef and 8.5% and 9.8 % of white meat and eggs respectively prior to H5N1 epidemic. Dairy production jumped by 32.21%/year.

 Regarding the value of animal products, the total revenue valued 19.2 thousands billion VND in 2001 and reached 26.2 thousand billion VND. Aiming to further develop the agricultural sector, MARD propose to raise the contribution of animal husbandry sector to 30% in 2010 and 35% in 2015.

 Vietnam’s WTO membership shall create the agricultural sector in general and animal husbandry in particular new opportunities. According to economic experts, Vietnam shall get all benefits from MFN offered by WTO members, including import tariff preferences, non-discrimination of developed countries; lower import taxes levied by WTO members, higher tariff quota, lower accumulation tax and removal of non-tariff barriers. At the same time, the foreign investment possibility shall increase, facilitating to develop infrastructure, science and technology of the animal husbandry sector. The stronger cooperation in science and technology and capacity building among WTO members are prerequisites for supporting the animal husbandry to overcome existing difficulties. 

Though Vietnam’s animal’s husbandry is still smaller than the others in the world. However, Vietnam still has certain advantages in terms of animals rising.

 Exporting pork is key revenue of many farmers in Vietnam. Since 1990, Vietnam’s piglets invaded in Hong Kong market and reached record 30,000 tons of port exports in 2002, however representing only by 2% of this country’s total import volume. Hong Kong is sure to be a very potential market.

 In Vietnam, poultry especially plays an important role in the small-scale production system and rural household economy. Epidemic and costs of poultry feed are key obstacles. However, in the future Vietnam completely can overcome such difficulties. The domestic demand of poultry products is increasing. Domestic poultry is a favorite taste of consumers, which is an advantage of the poultry raising sector. Furthermore, poultry raising for meat and eggs is also a competitive advantage against the international imports available in domestic markets. 

Regarding dairy production, the country presently meet only 20% of the domestic consumption, the rest of 80% is to be imported in context where the demand of dairy products is promptly increasing and dramatically increase in the coming years. This is a great opportunity for the dairy production sector to develop. However, this sector also seeks solutions to overcoming technical problems and difficulties in quality of breeds and management capacity and distribution network. 

As evaluated by the World Bank (March 2006), Vietnam is still a self-sufficient beef producer. This country still remains this position in the coming years. Vietnam also has many chances to export beef to neighboring countries along Mekong Delta. Beef production is planned to increase beyond the self-sufficient level in the future. To do this, it is required to make investment in techniques, including genetic techniques, make the best use of natural pasture and other byproducts available.

 Over recent years, raising goat and sheep is growing up; however, its quantity is still small. However, this sector has potential to develop at a fast speed conform to the consumer’s taste. Production and supply of export products originating from goat and sheep raising is also a strength to be promoted.

 The export of bee honey achieved 30.3% of the export turnover, increasing by 21.9%/year on average. The record rate was 13,000 tons of bee honey exports in 2003, reaching nearly US$25 million. The markets for bee honey remain potential but unstable.

 Silkworms raising is a long traditional occupation. This sector mobilizes many labor force, low capital construction and fast production. Japan, some Southwest countries and Uzebekistan are an important market for silkworms. However, the growth of silkworms gained only nearly 1.3% of production, and its export turnover increased only 23.14%/year. The biggest difficulty of the silkworm production sector is lack of high yield and high quality silkworm breeds, failing to meet requirements for the export of silkworms. 

Vietnam’s animal husbandry has lower production and quality than more competitive regional and international countries. When import tariffs and non-tariff barriers are removed, high cost home-made products shall have to be competitive against efficient-cost imports from WTO member countries, for instance milk, pork and beef.

 Cost of animal breed is also a burning problem in Vietnam since the price of cattle feed is very high (1.5-2 times as high as that of regional countries), leading to high production cost and lower competitiveness. The capacity to link between raising and slaughtering and processing is still poor and inconsistent. The small-scale and low capacity slaughtering and processing houses with obsolete technologies and equipment caused low competitiveness of products. Epidemic also weakens the competitiveness of the animal raising sector. Standards for SPS become more and more important in regional and global trade.

 The model of cattle trade remains small and incomplete as required by international integration; the weak capacity to understand international trade practices is needed to be overcome to avoid risks when the cattle products integrated into the international markets. Aiming to make the best use of comparative advantages and overcome challenges, it is required to focus on dealing with the following issues:

 Renovate policies on developing the commercial raising sector in medium and large-sized scales, bringing in high yield and quality and competitiveness. Priorities are given to developing key industries for instance pig and poultry raising.

 Scientific and technological development serves to shift structure and increase productivity and quality of cattle products aiming to increase competitiveness of home-made cattle products compared to imports just right in Vietnamese market. Science and technology development is needed to focus on thoroughly satisfying demands of the animal raising sector, avoiding the fragmentation and inefficiency.

 The cattle feed production sector is supposed to be developed in order to improve the quality of cattle and reduce production costs. At the same time, grass and forage cultivation is required to be enhanced in order to increase the use value of agricultural and industrial byproducts as cattle feed. Using green raw feed and making the best use of byproducts shall be considered as an advantage to reduce production cost of cattle products. 

In parallel with consumption market expansion, it is advised to focus on completing the processing industry attached to food security; making investment in slaughtering and processing houses to meet export criteria. 

It is apparent that the WTO membership creates new opportunity for Vietnam’s animal husbandry. However, only when challenges are recognized and greatest efforts are made, could Vietnam’s animal husbandry make the advantage of such opportunity to develop dramatically.   

VINH LONG: Agriculture sector international intergration

 Vinh Long is an agricultural province specialized in a series of famous agri-products in the South of Vietnam. From now to the year 2015, Vinh Long is still a key agriculture-based economy when Vietnam entered WTO. The province is focusing on helping their farmers to change agricultural production methods in order to improve competitive advantage of Vinh Long’s agri-products, meeting the domestic and export demands. 

Majority of agri-products in Vinh Long province like fruits, marine products, paddy rice, mushroom, sweet potato and clean vegetables are all fresh and typical agri-products of Vietnam. However, these agri-products are raw materials since farmers still carry out production in a small scale. Furthermore, centralized material zones are non-existent and due attention has not yet paid to producing commodities in accordance with GAP standards. Nam Roi pomelo has become well-known by foreign customers, however only 20-30% of its production can meet export standards. Binh Minh sweet potato is possible to be exported to Chinese market. However, its export volume is still moderate since farmers has not yet had firm knowledge of harvesting techniques. As a result, a great quantity of ugly sweet potato is still kept to be consumed in domestic markets. Regarding fruits only, Vinh Long province has increase the cultivation area to nearly 43,000ha this year. The yield is estimated to be 360,000 tons, rising more than 60,000 tons against the year 2005. In which, many fruit specialties are well-known by national and international consumers. Over recent years,  Vinh Long has made greatest effort to developing the trade mark of Nam Roi Binh Minh pomelo, Tam Binh orange, Tu Quy Ba Minh mango. However, the number of products which has a strong brand name is still limited. The main reason is that fruit cultivation in Vinh Long is still fragmented in small household scale. Some of specialized cultivation areas have been established. However, the quantity of such area remains inconsistent and unstable. Production is not yet closely linked to consumption. At present, agricultural products of Vinh Long province lacks the linkage ranging from production, processing to storage, consumption and export. The post-harvest technology in the province has not yet kept up with the regional growth. Farmers and enterprises seek their clients by themselves so they are in short of support and links. As a consequence, they failed to get big contracts. On the other hand, the province has not yet set up large material zones, failing to supply raw materials to liquidate big contracts, except for rice. 

In the context of integration, aiming to improve competitive advantages of agri-products, Vinh Long province is speeding up the planning and development of large-scale centralized production zones and safe production areas. Vinh Long province shall make planning for fish aquaculture, biologically safe poultry raising, centralized fruit cultivation, insect-free seed production, modern paddy production, and crop specialization. In addition, the province shall adjust planning zones for aquaculture, irrigation and agriculture from now to 2010; continue to implementing the agricultural crop seed and animal breed programs (paddy rice, fruit trees, marine products, poultry, pigs and cows); develop conservation technologies, post-harvest processing technology; develop centralized distribution channels 

At present, the Province has elaborated a project for establishing wholesale fruit markets in Tan Hoi commune, Vinh Long township and wholesale market for agri-products on Cai Von town, Binh Minh district. The wholesale fruit market Tan Hoi shall be set up in an area of 10 ha in Vinh Long township bordered by Co Chien river where a variety of key fruits with high quantity come from Vinh Long and its neighboring provinces such as Cho Lach market of Ben Tre province, Chau Thanh district of Dong thap province and some communes of Cai Be district of Tien Giang province. The wholesale fruit market shall be the place where various type of speciality and high quality local fruits shall be sold out wholesale to visitors, supermarkets, to processing factories and to domestic and export markets, contributing to the local socio-economic development. 

The wholesale market for agri-products in Cai Von town of Binh Minh district is planned to be 5 ha large. This is the place where various categories of vegetables, bulbs and fruits and other crops within the province and the Mekong Delta are to be supplied to the 2 biggest markets, i.e. Ho Chi Minh city, Can Tho city and neighboring provinces. Moreover, semi-processed raw materials are to be supplied for processing sector for exports. The province also continues to develop market networks in certain communes, in which many markets are applying the approach “self-sufficiency” which helps farmers to consume their produces and facilitate enterprises to procure raw materials with the large quantity.

 The on-going Project for linkage between safe fruit production and consumption throughout the Tien River basin (including Tien Giang, Ben Tre, Vinh Long, Dong thap, Long An provinces and Ho Chi Minh city) aims to establish the linkage between fruit production and business conform to GAP procedures, creating high quality products, improving competitiveness of agri-products in the light of international integration and satisfaction of national and international clients’ demands. Such 6 provinces have large fruit tree areas (2/3 of the total fruit area of the Mekong Delta), fertilize soil, convenient transport conditions and large fruit trade center, the Southern Fruits and Vegetables Research Institute and many special fruit seeds with high competitiveness in domestic, export and processing markets. This Project promptly contributes to creating the links among “4 stakeholders” who are able to fulfill their functions in order to develop and implement the production line in accordance with EU standards (EUREGAP). 

MARD has just approved the plan for developing special fruits in the Mekong Delta 2010 aiming to promote strengths and develop fruit production into a commercial and competitive industry in national and international markets Out of 9 selected fruits, Nam Roi pomelo, green skin pomelo, Tam Binh orange and durian Ri 6 amd Chin Hoa durian and Hoa Loc mango are well known. They favorite fruits of consumers and they won Vietnamese monopoly trademark protection certificate.

 Recently, Vietnam-Japan Friendship Organization paid a working visit and field surveys on clean vegetable production areas of the Phuoc Hau commune cooperatives (Long Ho) and Thanh Loi commune cooperatives (Binh Minh) in order to learn about the capacity of production and consumption of clean vegetables of Vinh Long people via vegetables production cooperatives. Therefore, one Japanese expert is planning to come to Vietnam to provide training courses in clean vegetable production in the coming time. And some representatives from Vietnam are also to be invited to visit Japan to learn about the experience in Japanese clean vegetable production. In case where such agreement is successful, the Japanese party shall make cooperation and technical investment in clean vegetable production and procure Vinh Long farmers’ produces. It means that Vinh Long shall have a stable and steady distribution channel for agri-products in the context of integration.