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OECD: Viet Nam made remarkable agricultural progress
Oct. 8, 2015
Economic reforms have generated impressive results in the Vietnamese agricultural sector, as farm production more than tripled over the 1990-2013 period, lifting rural incomes, reducing poverty, combatting under-nourishment and sending agro-food exports soaring. Viet Nam should now seek to build on these achievements while addressing long-term challenges posed by slower rates of production growth, declining commodity prices, limited land for further expansion and increasing evidence of negative environmental impacts from farming, according to a new OECD report.
The OECD Review of Agricultural Policies in Viet Nam highlights progress in the farm sector since the Doi Moi reform programme launched in the mid-1980s. Production growth saw the proportion of undernourished people fall from 46% of the population over the 1990-92 period to just 13% over the 2012 14 period, one of the strongest improvements worldwide.
Parallel to this accomplishment, Viet Nam radically boosted its place in global agro-food markets, becoming the world’s largest exporter of cashews and black pepper, the second largest exporter of coffee and cassava and the third largest exporter of rice and fisheries.
“Viet Nam’s agricultural transformation over the past two decades has been nothing short of remarkable,” OECD trade and agriculture director Ken Ash said during a launch event in Hanoi with Vietnamese Vice Minister of Agriculture and Rural Development Le Quoc Doanh “Going forward, Viet Nam needs to improve its policy environment, to enable investments that will allow the farm sector to continue to adapt to the opportunities created by rising demand and the challenges of climate change and limited resources. Rising labour costs will open opportunities to adopt new technologies and encourage larger farms, but they may also reduce the sector’s overall competiveness, particularly if newer labour-saving techniques are not readily accessible or adaptable to the dominant small-scale farming,” Mr Ash said.
The OECD Review highlights the need to reduce constraints on private investment, including land fragmentation, which limits economies of scale, and various restrictions on land use rights, which raise costs. Large investors can have difficulty accessing long-term financing, while small-scale producers continue to rely mostly on informal credit.
Basic rural infrastructure has significantly improved over the past decade, but investment has not kept pace with economic growth, resulting in serious infrastructure bottlenecks.
The level of support to farmers - as measured by the share of the policy-driven transfers from consumers and taxpayers in gross farm revenues (percentage Producer Support Estimate, %PSE) – has varied widely from year-to-year since 2000, reflecting the government’s efforts to stabilise domestic prices while balancing the interests of producers and consumers in the context of price volatility on international markets.
Support to farmers averaged 7% of farm incomes over the 2011-13 period, which is relatively low, but nevertheless the transfers supporting agriculture are equivalent to 2.2% of GDP, which is one of the highest across all countries covered. This demonstrates that for a developing country with a large agricultural sector and low GDP, even low levels of agricultural support can have relatively high costs for the economy.
“Our analysis shows the high potential burden of Viet Nam’s current policy mix on public finances, and reinforces the need to ensure that the money is spent effectively,” Mr Ash said.
Source: OECD
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