The strategic role of the private sector in agriculture and rural developmentPlatform Knowledge Piece 3 Launch : A case study of Vietnam

Pham Thai Hung,With support from Le Thi Quynh Nga, Do Thu Trang

Wednesday 28th March 2012International Fund for Agricultural Development, Rome

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Private sector responses: Rice

• Rice sector: 2nd world largest export; turning from hunger to strong surplus in few years after Doi moi

• Rice in the Mekong: role of private sector– Production: by 1.46 peasant hhs, 2/3 own less 0.8 ha– Export: 80% by SOEs; around 55% is G2G contract

• Problems found– Farmers: 2/3 is small-holders (either not profitable or even ‘lost’ if

being net buyers of rice); 20% largest erned the most– Exporters: limited to SOEs; over-reliant on G2G (low quality)

trade– Knocked-in ‘low quality’ trap:

• Farmers: ‘mixed bag’ approach, lack of certified seeds• Govt: create distortions; 3.8 million ha for rice?• Other services providers: weak NAFEC

Private sector responses: Coffee

• Coffee sector: 2rd largest producer/exporter (of robusta) – from almost zero at the Doi moi

• Coffee in CH: role of private sector– Production: state farms collapse private coffee growers (around 600

thousand peasant hhs); 90% own less than one ha– Exporter: foreign-invested (40%) and around 200 small processors selling

to SOE exporters

• Problems found– Unsustainable production: world highest yield due to intensive fertilizing

and underground watering– Knock-in low quality:

• Farmers: sun dried processing by farmers low quality; small scale lack of investment

• Other producers: low incentives as int’l buyers are happy to buy these low quality coffee bean

• Almost no state interventions• Ethnic minorities and the poorest tend to set aside

Private sector responses:Organic Vegetables

• OV sector: very new in Vietnam; perceived as potential

• OV in the Red River: role of private sector– Production: pilots by INGOs; small scaled; production in

groups; PGS is the only certification process– Trader/processors: few newly established private firms in

Hanoi; OV marts or few supermarkets

• Problems found– Lack of legislation background; PGS is the only cerfication– Constraits :

• Farmers: technical training; land fragmentation; • Firms: poor awareness on OV

Engagement of development partners

• General discussion: – Donors being pro-active in supporting development agenda of VN– Predominance of Japan, WB, and ADB (70%) is a driving force– Effective coordination is a big challenge

• Engament of donors in PSD and ARD:– Mainly in ‘enabling’ environment: rural infrascture, legislation

reform toward better playfield for PSD, rural poverty reduction interventions

– Few direct engagement in key agricultural sectors/products (rice, coffee, seafood)

• Finding entry points for furture interventions:– Vietnam as midle-income country donors have revised strategies– Cross roads ahead

Key messages for donors

• Rural economy growth: largely private sector led after major agri liberalization; benefits generated were distributed unequally

• Major challenge– Cheap food trap– Government has ‘withrawn’ and remained unprepared for high value

agriculture

• Entry points for donors– Pro-poor value chain on high quality agriculture products– Revisiting agriculture structure e.g rice, coffee, aquaculture– Capacity of service providers– Climate change adaptation in agricultural production