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Developing an Agricultural Researchand Development Priority Framework for Vietnam Economic & Policy Sub-Sector Workshop Data and Information Sheets: Economic & Policy Research Opportunit

Developing an Agricultural Research

and Development Priority

Framework for Vietnam

Economic & Policy Sub-Sector

Workshop Data and Information Sheets:

Economic & Policy Research Opportunity

(EPROs)

FORECAST & POLICY ANALYSIS

ENVIRONMENT MANAGEMENT

AND TRANSFER DELIVERY SYSTEMS FOR AGRICULTURE AND RURAL DEVELOPMENT

SUSTAINABLE POVERTY REDUCTION

INTEGRATION AND MARKET ACCESS TO THE VIETNAM AGRICULTURAL TRADE

July 2010

EPRO 1: COMMODITY RESEARCH, MARKET ANALYSIS, FORECAST

& POLICY ANALYSIS

DATA SHEETARDO DEFINITION

1.1 National Goal or Purpose

To develop the capacity for market analysis and forecast, to improve competitiveness of majorVietnamese products in domestic and international markets and to use that capacity as a basis forproviding commodity policy advice, including food security, to Government

3 Conducting in-depth analysis and demonstration model of market change at macrolevel in short term and long term, in order to help in forecasting and planning work ofMARD, local authorities and agri-business organizations

4 Provide timely information and awareness of commodity analysis results via policydiscussion forum, market outlook conference, publications to assist the public andprivate sector to develop stable and profitable markets

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 productionbased on the exploitation of advantages on diverse biological resources Food, aquaculturelivestock, vegetable, fruit and industrial crop production has grown significantly Foodproduction (including paddy, corn, cassava and sweet potato) has increased annually In theperiod from 1996-2001, total food production has increased from 31.48 million tons to 39.43million tons (equivalent 5.05% per year) In 2002-2006, production rose further from 43.1 milliontons to 48.9 million tons (2.69% per year) At the same time there has been increased

competition for land and water uses between rice production and industrial crops or other uses asindustrialization continues in the Vietnamese economy Between 2001 and 2007, more than500,000 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 isestimated to reach 13.6 billion USD, up 25.7% over the same period last year, in whichagricultural products reached 7.4 billion USD, up 42.5%; fisheries reached 3.8 billion USD, up24.2%; forestry products reached USD 2.46 billion, increased by 16.7% In the same time, theagriculture sector had 5 products with turnover of over 1 billion USD (fisheries, rice, forestryproducts, coffee and rubber) out of 11 products that reached value of over 1 billion USD of thecountry

However, agricultural markets in 2008 also witnessed many unexpected changes During midyear, 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 (orUS$1.3/kg) in late April 2008 During 2009 export prices have declined A similar situationhappened with meat products and industrial crops such as rubber, to early 2009, the price ofrubber (1,500 USD per ton) decreased almost 50% compared with the peak in 2008 (2900 USDper ton) The stabilization of food prices is important because rapidly increasing food prices willreduce purchasing power In 2007 food prices have increased 14.6% In early 2008, food pricesincreased sharply, leading to the share of food reaching 43% in total household expenditure.Among Vietnam’s agriculture products, rice (15%), aquaculture (30%), coffee and rubberaccount 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 twodecades, Vietnam has become one of the world’s biggest agricultural exporting countries,including rice, coffee, cashew nut, pepper, rubber, tea, aquaculture, etc Exported agricultural andforestry products account for 30-35% of total agricultural production Exporting ratios by sectorsare 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 worldmarket (e.g rice, coffee, cashew nut, pepper, and fishery products) Markets for Vietnam’sagricultural products have been expanded, besides traditional markets (e.g China, ASEAN,Russia and Eastern European countries); Vietnam has initially entered such potential markets asMiddle East, EU, the USA and Africa

Vietnam is moving quickly to market economy and integrating into global economy Demandand supply of agricultural products fully depend on market forces, rather than on top-downdecision as it was in central State economy The change from planning based on centrally derivedproduction targets to producers, processor and exporters planning based on market opportunitieswill take time, but without reliable market forecasts is unlikely to happen Thus, it is necessary tohave study on market analysis and forecast, which would assess comparative advantages, thenprovide guidance and create motivation for market forces to restructure the production andmarket system based on comparative advantage

While moving to market economy, Vietnam’s agriculture faces a lot of challenges, especially theissue of supply surplus in many agricultural commodities e.g coffee, dairy, vegetable, sugarcaneetc 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

of poor returns and capitalise on improving market opportunities Many commodities (e.g fishproducts like shrimp and catfish, rice, coffee, pepper, and cashew nut etc.) fail to forecast marketdemand and unexpectedly face surpluses or deficits Farmers often follow short-term marketsignals, 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, forinstance in cases of tea, sugarcane, cassava and dairy processing

Experience of leading countries in agriculture development e.g USA, EU, Australia and Japanprovide valuable lessons The USA has Economic Research Service (ERS) under Ministry ofAgriculture; Australia has Australian Bureau of Agricultural and Resource Economics (ABARE)directly under the Government with thousand of staffs Especially ABARE, which has 300experts work on management and quality control issue of products Countries like USA, EU andAustralia 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 andinformation could provide valuable inputs into advice on policies for the agriculture sectorincluding 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 planwith focus on the development of high value commodity crops, livestock products and forestryplants toward yield and production improvement The plan also clearly states orientation ongrowth rate, production, added value, the share of agricultural commodities, etc in order to pushthe development of these commodity sectors This is considered the key task in the action plan onthe agricultural sector Therefore, it can be said that commodity development with key solutions

of policy reform, institutional, organizational and public investment improvement are the firstimportant 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 ofdeveloping comprehensive agriculture orienting to modern, sustainable and massive commodityproduction, Vietnam has not yet issued policies or comprehensive strategies on a particularagricultural commodity or on the investments in commodities related to future or stable orsustainable markets Policy intervention is mainly through related policies which may directlyand indirectly affect the commodity sector These include 3 major policy groups on productionsupport, land and trade and supporting agriculture production policies such as science andtechnology, credit and agricultural extension Much of the legislation relates to Vietnam’sobligations 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 andexporters of Vietnamese product to be competitive while being profitable Examples of relatedpolicies include:

Policies on production support

 Decree No 225/1999/QD-TTg dated December 10, 1999 on crop and forestry varieties andbreeding 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

 Decree No 129/2003/ND-CP (2003) relates to exemption of agricultural land use and thelatest 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 anduse 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 theState with five main responsibilities: (i) Formulate land use zoning and land use plans; (ii) Decideland use quota and duration; (iii) Grant land use rights to land users; (iv) Collect taxes relatedland use; and (v) Determine land prices Land users are allocated with land for long-term andstable 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) farmappropriate crops and rotations; (ii) pay attention to land fertility maintenance; and (iii) pay taxesand 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 landlimit In 2003, the Government promulgated a legal regulation exempting most farmers frompaying 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 ofabout 4 million ha of irrigated for rice production and ineffective rice land types (compared tothe 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 economystipulates policies on land allocation, lease, transfer of land use right in order to encouragecultivated land concentration, agricultural development toward farming scale, facilitating thedevelopment 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 andsupport policies and avoiding the use of policies that distort the world trade of agriculturalproducts

 Decision No 1042/QD-BTM issued by the Ministry of Trade on 29 June 2007 on liftingbonus for export achievement This decision is to implement Vietnam’s WTO commitment toremove export subsidies

 Law No 20/2004/P L-UBTVQH11 on 29 April 2004 on anti-dumping of goods importedinto 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

 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 agriculturalproducts 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 meetimporting countries SPS requirements The following legal documents and policies have beenissued:

 Decision No 04/2008/QD-BNN on 10 January 2008 on the functions and cooperation ofVietnam’s SPS enquiry points

 Law No 12/2003/P L-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 planfor 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 15February 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 implementingWTO 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 withinstruments to protect authors, investors, brands and names against imitation and reproduction.Plant varieties and geographical indications relating to agriculture are also covered in thisagreement

The following provisions oblige WTO members to introduce intellectual property rights for plantvarieties 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 forplant 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 affectagriculture, 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 thedevelopment plan on processing industries for agricultural and forestry products until 2010and vision towards 2020

 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 andimplementation of bio-technologies in agriculture until 2020

 Law No 05/2007/QH12 dated 21 November 2007 on product quality This providesregulations on quality of export products in general and binding that all exporters have tofollow this law and other international and regional commitments

 Decree No 151/2006/ND-CP dated 20 December 2007 on regulating national credit forinvestment 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 mainlysituational and passive, often issued at time of crises (rice crisis, coffee, food safety, animalinputs, etc.) Commodity policies are mainly support for production, and specific regulationsrelating 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, forecastfor investment, production organization, input materials, production, processing, trade, qualitycontrol, risk management, and support for end consumers Policy formulation process is reactiveand is generally not on a scientific basis and does not have proper consultation of many relevantstakeholders such as policy makers, researchers, private sector, farmers, etc As a result, marketforecast 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 animbalanced sectoral structure Farmers are encouraged to invest in strong export commoditiessuch 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 toreceive sufficient support Investment in strong export sectors are large often without due regard

to markets Supply, often of low quality, has quickly exceeded demand for some crops withsurpluses in crops such as coffee, rice and catfish in recent years having significant impacts onproducer’s livelihoods At the same time, investment and competitive advantage in localconsumption-oriented sectors/product is reduced increasing the risk of loss of domestic marketsthrough intense competition from imported goods

Farmers are the weakest actor in the value chain: Compared to other market actors, farmersbenefit the least from the value chain Though current policies all give priority to farmers, nopolicy is really suitable Some policies give “in-kind” support rather than method support toencourage farmers Value added along the value chain mostly comes from processing, packaging,advertising and marketing stages while almost Vietnamese farmers can access to raw production.This is particularly true to small-scale farmers or those living in remote and mountainous areas

Social Environment

 Transfer of agricultural land for industrial purpose impacts on poverty and labour as farmfamilies are forced to look for non-farming jobs According to estimates of the Ministry ofSocial, War Invalids and Labour, on average, 1.5 labour of one farmer household isunemployed as their production land is revoked while most of them are not well educated andvocationally trained

 Farmer’s decisions on farming systems they use and the mix of farm products is restricted bydesignation of land use for specific crops, such as rice While this may provide someassurance of food security, it is also likely to significantly impact farm household income,through inability to switch to higher value production systems.

 Modelling work will identify impacts on income distribution of agricultural land use andtransfer as well as trade liberalization at regional and sectoral levels, will assist in identifyingvulnerable groups and the development of policies to support them This will help theVietnamese Government clearly identify problems and purposively select social welfarepolicies, avoiding expenditures on ineffective sectors

R&D Information

Main Research Areas

Research on demand – supply of agricultural commodities

 A study on methodology for supply and demand of the rice sector1

describes the application

of geographical information system (GIS) and modelling in analysing the balance of supply –demand of rice for seven ecological zones of Vietnam The important outputs include (i)identification of areas of comparative advantage for rice production; (ii) methodologies forimproved estimation of rice yields and total production and forecasting demand for eachecological region including some provinces; (iii) estimation that with a rice area of 4 millionhectares, and projections of domestic demand that Vietnam can maintain exports of 2-4million tons/year with a price decline by 20% resulting in exports close to the 2m tons/year;(iv) Household demand for rice in 2010 with the rate of urbanization of 33% will be about13.8 million tons Price variation of rice will increase or decrease consumption of rice byabout 1 million ton

 Trends for livestock development in Vietnam2

are impacted by instability and high prices ofmeat, high cost of animal feed, high price of breeding, and ineffective veterinary services.Output is limited by low income, low meat quality, incomplete standards and system, lack ofinformation, and lack of distribution system for consumption It also indicates the role ofgovernment in creating a legal corridor, management of quality standards, safety and hygiene

of food that are very important and necessary to be improved to strengthen their role insupporting the promotion of the livestock sector

 Domestic consumption of coffee3

sector, using survey data based on standard of livingindicate an increasing demand for coffee, especially in urban areas of Vietnam

Research on competitiveness

 In 2002, Nielsen3

conducted a research on rice sector of Vietnam on the international market,summarizing the production, structure and commercial trends of the international rice marketand an evaluation of current policies for rice, especially the policies relating to market access,export subsidies, use of GMOs and domestic support in other countries

1 Chu Thai Hoanh (IRRI), Dang Kim Son (ICARD) and the colleagues from the University of Wagenningen.

2 Vu Trong Binh and Lucy Lapar (ILRI) (2203) "Hinders for participating in input and output markets of livestock in Southeast Asia: the case of Vietnam."

3 2005, Tran Thi Quynh Chi and Muriel Figue

 Research on the competitiveness of Robusta coffee industry of Vietnam4

concluded that thecompetitiveness of Vietnamese coffee in the past is based on cheap labour, high productivitythrough more fertilizer and irrigation, and infrastructure development policies for allstakeholders involved in production, processing and consumption of coffee Recent trends inthe coffee market have shown that it will be hard to maintain the high competitiveness ofVietnamese coffee as the market trend is towards high quality, organic and clean productstogether with increasing concern for GAP and environmental impacts

Research on the impacts of world trade integration

 Nielsen (2003)5

listed 3 trade policies which have direct impacts on Vietnamese rice sector:(i) Removal of the quota on rice export and import of fertilizer is likely to increase theeffectiveness of resource allocation within the economy

(ii) Land policy and land allocation - measures which restrict the change of agricultural landuse purposes create obstacles for production and export and control of agriculturaldiversification activities through adjustment of land use allocation will reduce comparativeadvantage and the socio-economic benefit of different partners

(iii) Preferential trade agreements with EU – potential trade partners of Vietnam are unlikely

to be beneficial for rice production and export of Vietnam as they place Vietnam in acompetitive playing field with all exporting countries to the EU

 A Study on trade liberalization in the livestock industry6

applied general equilibriummodelling to assess the impact of trade liberalization indicated that (i) In general, tradeliberalization would not have negative impacts on Vietnamese livestock industry as thevolume of meat trade internationally would be low; (ii) impacts of international tradeliberalization, such as price shocks are likely to be low as Vietnam is self-sufficient in porkand poultry with relatively low consumption of beef; (iii) exemption and reduction of importtax on materials for animal feed processing on the development of the industry, especially pigand poultry raising is likely to benefit the domestic livestock industry

 One of the negative impacts of trade liberalization and increasing dependence on export is thevariation in domestic price7.as price uncertainty not only makes farmers vulnerable but alsoaffects those in processing industries and some traders Coffee prices peaked to a historic high

in 1990, causing overproduction and thus dropping prices which resulted in a serious impact

on the livelihood of coffee growers, particularly those in Daklak province – the biggest coffeearea in Vietnam With low world prices and evolving globalization and trade liberalization,farmers especially the poor, will be the most vulnerable

4 Cao Bang Hoang, Tran Thi Quynh Chi, et al (2004)

Commodity value chain research

 A comprehensive study of the rice value chain in Vietnam8

concluded that (i) Vietnam suffersfrom a lack of and infrastructure environment and policy mechanism to enhance foodsecurity, decrease rural poverty and increase income from exports; (ii) Methods for creatingvalue for the rice industry include increase productivity, especially in the mountainous areas,remote areas and increasing production and export of special rice with high quality The role

of the state sector in direct investment in productivity increase should be only limited toirrigation supply, infrastructure strengthening and policies and the private sector shoulddevelop specialty and high value markets In addition, investment in the rice industry should

be combined with policies on crop diversification to solve the problem of rural poverty

 A comprehensive study9

on livestock market actors such as producers, feed traders andprocessors, meat traders, meat processors, consumers, retailers and veterinary agenciesanalysed demand for meat and calculated price elasticity in Hanoi and Ho Chi Minh City

Research on commodity supply forecast

 A study10

on forecasting long-term supply of 5 main coffee regions in Vietnam usingVintage model a analysed the impacts of various factors (coffee prices, inputs prices, treeage and productivity etc.) on coffee supply The research makes specific predictions ofcoffee supply of each province in the research area

 Information collected has not met all the demands of commodity market research,particularly the information needed to assess supply and demand of the goods

 Timeliness of information on strategic commodities collected by the down-to-communevertical hierarchy General Statistics Office often means that prediction of crop yields are notavailable until well after harvest time, which does not support sound investment decisions

by producers, processors and exporters

 Vietnam has not yet been able to build scheme and development planning based on thestudy of the competitiveness and comparative advantages of the main commodities – amongthe local regions as well as between Vietnam and other countries

 Research for market analysis of some strategic goods is available but not yet comprehensiveand does not come into details of the international market, tastes of the potential markets,

8 Agrifood Consulting International (2002)

9 International Food Policy Research Institute (IFPRI) and the Ministry of Agriculture and Rural Development (MARD) (2001) "Selecting livestock policies to promote rural income diversification and growth in Vietnam”

10 Tran Thi Quynh Chi et al (2007)

and competitiveness of Vietnamese goods etc This is especially true for research conductedwithin projects, which are usually not updated continuously and systematically.

 Market outlook for Vietnamese agricultural commodities is almost left untouched byresearchers Although the Institute of Policy and Strategy for Agriculture and RuralDevelopment has done some researches to analyse the economic forecast for coffee sector,few researches applied the balance model, which are partly for rice and animal-feed sector;these researches are merely experimental and primitive Other strategic sectors have not hadsimilar researches

 In order to carry out similar researches in other commodities, there should be a system ofstandardized research methods applied synchronously to all sectors However, thisstandardized system has not been established yet

 Our industry experts are not so good at modern and high-level research method servingmarket analysis and forecast; in addition, these people are scattered in various researchagencies, not yet gathered into a united and effective organization

 Therefore, in general the market research for agricultural strategic commodities in Vietnamhas not met strict requirements in terms of quality and update level of a consultancy productfor both policy makers and agricultural businesses

 Industrial organization at macro scale to the individual strategic commodity is still a newconcept for Vietnam United mechanism for a sector, which results in the best cooperation,advantage taking and cost minimization among the stakeholders in the value chain of thesector, has proved itself as an effective way in many countries In particular, if a commodityorganization is established, it will perform the following functions: (i) sector management;(ii) research organization, experience exchange, performance improvement; (iii) policyproposal; and (iv) investment consultancy, etc

 Information is not available to farmers, extension workers and the beyond-the-farm-gatestakeholders in a timely manner so that they can make forward plans and investments toimprove returns and profit

 There is no information on the “heath” of the smallholder farming sector This informationand data could be collected routinely through development of monitoring systems for themost important farming systems Such information would greatly assist development ofagriculture and rural policies that address financial and social issues important tosustainability of rural households

 Weaknesses in planning, market information, quality control, agricultural crop and foodsafety management, input and output price stabilization, etc have reflected poor capacity ofthe management of formulation and implementation of agricultural commodity policies.However, capacity of agricultural policy research, implementation and management is stillvery poor It is necessary to work out large-scale and long-term programs which cansufficiently meet production requirements Therefore, support from this project is reallyprecious and necessary; however, this is just initial step Further efforts and investment arerequired to catch up with that great demand

Research providers

MARD does not yet have any organizational systems or processes for development of up-to-dateanalysis of commodity markets Commodity research and information is often project related,

short term and lacks an organizational framework Development of these skills will take timeand will require international technical assistance.

IPSARD is currently one of a few agencies that are doing policy research on agriculturalcommodities in Vietnam IPSARD researchers are weak and insufficient in terms of the number

in analysis and forecasting work using advanced economic models Therefore, capacity building

in this area is very necessary to implement the project Information sources and forecastingexperts using economic models that IPSARD is focusing on for learning experiences include:

- Economic Research Service - ERS under United States Department of Agriculture;

- Australian Bureau of Agricultural and Resource Economics - ABARE;

- International Food Policy Research Institute – IFPRI; and

- International Livestock Research Institute – ILRI

SWOT analysis

 Study methods (market analysis, forecast

models) are now available.

 Established relationships with international

agencies experienced in commodity analysis

 There are many professional commodity related

reports that are becoming increasingly available

through the internet

 Professional, enthusiastic experts of market

research are gathered in IPSARD

 IPSARD with its policy consultancy function

will be the best bridge to MARD and

Government

 Priority commodities play a key role in economy

and export turnover, and need for market

research and forecast is huge

 As part of the Government, it will be easier to

obtain technical support from Statistics Office of

Vietnam in design and establish the monitoring

system.

 As an official economic research organization, it

will be easier to get the approval for establishing

such a monitoring system and the cooperation of

 Experts of MARD mainly focus on production fields like: varities, agricultural expansion and irrigation, while there are few experts on commodity and agricultural market.

 Practical experience of reseachers at IPSARD or in other agencies in Vietnam is relatively weak.

 Domestic data is not sufficiently updated in accordance with variables for market analysis and forecast.

 There are not enough international data from big markets and exchanges and access too much of this data and analysis is costly.

 The studies usually use old data, and take long time; therefore, they haven’t been able to response quickly to urgent requests of policy makers and businesses.

 Lack of funds and statistics expertise to establish a production monitoring system.

 Lack of relationship and network with provincial officials.

 Policy makers are lack of scientific information for market forecast, therefore policy recommendations from scientific studies haven’t really been taken in decisions making.

Opportunities Threats

 Market forecast plays more and more important

role policy making decisions.

 Data with sound analysis could provide

information that would improve investment

decisions by producers, processors and

exporters and assist in development of policies

including food security

 A shift from production target driven planning

to planning based on commodity research will

provide a scientific base for decision making

 Through IPSARD, this EPRO can get

cooperation with international organizations

who are experienced in agricultural market

monitoring.

 Vietnam’s Government and MARD consider the

issue of food security as a national priority.

 There are more and more relevant parties

interested in market forecast study, and give

prominence to market study impact to

eco-social development of agri region and rural and

the whole economy.

 “Tam nong” Decision just out expresses the

Government’s concern of agriculture.

 Promotion and regular updating of commodity

information will assist in developing a longer

term planning approach to agro-industry

development

 Development of commodity analysis and

continuous monitoring will address policy

makers needs for quick and continuously

updated comments

 A mix of short and longer term forecasts will

better meet business investment decisions

 Lack of long term financial support for development and maintenance commodity forecasts will mean that any short-term funding is likely to be wasted.

 Inability or unwillingness of other government departments or institutions with significant experience in farm surveys and agricultural market forecasting will jeopardize the ability to provide sound commodity analysis and advice.

 Final products need to be able to satisfy the demand from MARD, other stakeholders and industries.

EPRO 2: NATURAL RESOURCES AND RURAL ENVIRONMENT

MANAGEMENT DATA SHEET

1 EPRO DEFINITION

1.1 National goal or purpose

To develop a legal framework and policy environment to enhance (i) the sustainable and efficientuse and management of natural resources in the agricultural sector and (ii) healthy environment

in rural areas to ensure the sustainable agriculture and rural development; and (iii) to reduce theadverse impacts of agricultural production on natural resources and the rural environment

 To study strategy/approach for the MARD and the government to maintain optimal naturalresources use and management and healthy rural environment; and

 To provide timely information and knowledge of these above research results via policydiscussion forum, conference, publications to assist the public and private sector to developtheir working plan and strategy

1.3 Coverage

The focus includes:

 Land use and management in agricultural sector and rural areas;

 Water use and management in agricultural sector and rural areas (irrigation and drinkingwater);

 Agro biodiversity conservation; and

 Rural environment protection

2 POLICY OVERVIEW

2.1 Introduction

Following a series of reforms, the Vietnamese economy grew rapidly during the 1990s Theagriculture also witnessed remarkable development with the annual average rate of four per cent.Despite this creditable performance, concerns are being raised as to whether this developmentcan be environmentally sustainable There are two main problems: first, uncontrolled pollutionfrom agricultural production activities; and two, the over-exploitation of natural resources Thesedangers in turn seriously affect the whole agricultural and rural ecosystem, reduce productioncapacity of physically environmental elements, decrease productivity of crops and animals andthreaten farmers’ health

Although the government has formulated series of policy to address these issues, the impactshave been limited It seems that no single solution can be found to remove the problems innatural resources and rural environmental management Instead, a careful mix of integrated andconsistent policies, supported by strong quantitative and scientific arguments, is needed.

2.2 Political and Legislative Environment

2.2.1 Land use and management

Land ownership and administration.

The Land Law 2003 states that all land belongs to the entire people with the State as therepresentative owner with five main responsibilities: (i) Formulate land use zoning and land useplans; (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

The state administration on land in Vietnam is executed at four levels: central, provincial, districtand commune While retaining ultimate control over legislation and policy, the central state hasdevolved land management to People Committees at provincial, district and communal levels

Land user, rights and duties of land users

 Rights: Land users were allocated land for long-term and stable use and were granted sevenrights of land use: transfer, exchange, lease, inheritance, mortgage, donation and using landuse as capital contribution; and

 Duties: Land users have to (i) farm appropriate crops and rotations; (ii) attend to maintainingthe fertility of the land; (iii) pay taxes and fees on agricultural land

Land allocation.

The Land Law 1993 and the Decree 64 CP 27/09/1993 allocated agricultural land to farmers inlong-term with stable use The most important principle of the land allocation was to maintainequality Commonly, many localities in the North allocated a certain amount of land to eachperson Other conditions that were taken into consideration during land allocation were socialpolicies, land quality, the irrigation system, distance to plots and capacity for crop rotation

Land use planning.

The land use zoning and planning is a bottom-up process based on geographical condition Theprocess begins at the commune level At this level, land use zoning and planning is formulated indetail on the basis of parcels of land Local production and investment plans will be formulatedbased on this physical planning framework Then, they have to submit the formulation to thepeople councils at the same level and to district people committees From the commune, theprocess then moves up to the district, provincial and national levels The periodic cycle for landuse zoning is ten years and for land use planning is five years

Agricultural land is classified by six categories: (i) Land for planting annual crops; (ii) Land forplanting perennial crops; (iii) Forest land (production, protective forest, specialized use forest);(iv) Land for aquaculture; (v) Land for salt production; and (vi) Other agricultural land stipulated

by the Government

Land use duration and quota

Plant annual crop, aquaculture, salt production 20 years 2 ha (Central and Northern)

3 ha (Mekong River Delta)

Additional land to plant perennial crop 50 years 5 ha

Additional land for protective forest and production forest 50 years 30 ha

Tax 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 Governmentpassed legislation exempting most farmers from paying agricultural land use tax until 2010

Agricultural land market

Land transactions: There are nine transactions related to land including transfer, exchange, lease,

inheritance, mortgage, donation, tender, lend and using land as capital contribution Thesetransactions must have the approval of the state to be conducted Then, the state will issue a newland use right certificate to land users

Land pricing: The government determines land prices on an annual basis but these prices have to

be close to the market level People committees of provinces and cities under central authorityshall establish specific land prices within their localities and submit them to the people councils

at the same level for comments prior to decision-making

Land mortgage: There are two ways that households can borrow money from the Bank using land

use right: (i) collateral value of the land use right certificate (around 50–70 per cent of the landvalue); and (ii) ‘trustable mortgage’ (the land use right as the trust for a loan with support of localgovernment and socio-political groups) Based on current regulations, the amount that can beborrowed from the Vietnam Bank for agricultural and rural development is not larger than VND

10 million for household farms and VND 20 million for commercial farms

2.2.2 Water use and management

Law on Water Resources 1998 indicates that ‘water resources belong to entire population underthe unified management of the State’ Before 2002, MARD was in charge of overall management

of the country’s water resources, but the government can delegate authority for specific water usepurposes to other ministries However, when the Ministry of Natural Resources and Environment(MONRE) was established in 2002, the state management function of water resources washanded over from MARD to MONRE

on-farm canals to provide full or partial irrigation services as required by farmers There are sixtypes of WUO: agricultural cooperative (main type), water user group, water management board,village’s water management board, water user association, and villages.

Irrigation supply fee is collected from organizations and individuals using water resources forgrowing rice, vegetables, winter crops, short-term industrial crops, and salt production A feeframe is set by the government and each province can determine a particular rate based on reality.Fee is in Vietnamese Dong (VND) charged based on the area of their irrigated crop land and type

of crops instead of volume of water they use

Fees are typically collected by water user groups, which retain a part of the fee for theircollection efforts The remainder is forwarded to the IMC However, fees cover typically notmore than half of the operation and management expenditure of the IMCs If natural disastermitigation and large-scale rehabilitation are included, the fees only cover about a quarter of totaloperation and management costs Most recently, Decree 154/2007/ND-CP of the Governmentexempts the irrigation supply fee for farmers in the canal served by IMC Nevertheless, farmersstill have to pay on-farm irrigation This policy has raised many concerns about its socialeconomic impacts and efficiency

Drinking water in rural areas

At central level, the National Centre for drinking water supply and rural hygiene of MARD isresponsible for: (i) design national strategy and plan of drinking water supply and rural hygiene;(ii) Formulate technical standards for constructing drinking water supply works; (iii) monitorwater quality At provincial level, there are centres for drinking water supply and rural hygieneunder the management of Provincial Department of Agriculture and Rural Development Eachyear, these centres select some communes in a province constructing drinking water works(including community water supply work, small reservoir, deep well, and private water supplywork) for rural population The budget for water work building is shared by national budget,provincial budget and water users The contribution of water users is at least 25 per cent of totalcost They can apply for credit from banks (the National Program’s total fund for credit is 5649billion VND) When the construction of water supply works is completed, they will betransferred to and managed by rural communities Apart from the public system, in someprovinces, there are also private companies supplying drinking water in rural areas Water usershave to pay water supply fees for these companies

Standards of drinking water for rural area are regulated by Ministry of Health Water qualitymonitoring implement by MONRE, MARD and Ministry of Health However, the collaborationbetween these ministries is not close

2.2.3 Agro biodiversity conservation

The first document is the Biodiversity Action Plan 1995 which designed of action forconservation and sustainable use of the country’s biodiversity In 2007 and 2008, the NationalBiodiversity Action Plan 2007-2010 with the vision up to 2020 and the Biodiversity Law wereapproved with the target of setting up policy framework for biodiversity conservation andsustainable development to harmonize regulations of different documents Besides, biodiversityissues were also included in main strategies and plans at national level such the ComprehensivePoverty Reduction and Growth Strategy for 2001–10, the Socioeconomic Development Plan for2006–10; the National Agenda 21 on Orientation strategy for advancing toward sustainabledevelopment(2002) and different laws: Environmental Protection Law 2005, Forest Protection and Development Law 2004, Law on Fisheries 2003, Commercial Law 2005, Criminal Law 1999, Ordinance

of Veterinary 2004, Ordinance of Plant Protection 2004.

The issues related in agro biodiversity protection are as following:

Agro biodiversity management system

MONRE is responsible to coordinate activities of relevant ministries, agencies and localitiesabout biodiversity protection in general MARD has responsibilities to collaborate with MONRE,relevant ministries, agencies and local authorities to implement relevant legal documents on agrobiodiversity issues such as plant seed protection, animal breed protection, fisheries protection,modified genetic agricultural products, forest and irrigation

Conservation of ecological system diversity

The ecological system diversity protection includes two types:

Inside protected areas (national park, natural reserved zone, species – landscape conserved zone

and landscape protective area) Over the past 40 years, the national system of protected areas hasincreased in size dramatically It includes 126 approved special-use forests (SUFs), comprising

28 national parks, 59 nature reserves, and 39 landscape-protected areas, with a total area of2,541,675 ha

Outside the protected areas (buffer zones, landscape, planning, and mainstreaming conservation

in production sectors)

Conservation of species diversity

MARD collaborates with other ministries, agencies to examine, assess endangered endemic plantseeds, husbandry animal breeds to include in the List of endangered valuable species and racesthat need to be protected

Custom agencies have to check, identify and address illegal imports of invasive exotic species.Provincial People Committees have to prepare the lists of invasive exotic species to report toMONRE and MARD The production of exotic species is only permitted after the examinationresult shows that this species is harmless to biodiversity

Conservation of genetic diversity

Ministries and agencies have to preserve and protect in long term the heredity elements of speciesand the List of endangered plant seeds and husbandry animal breeds for the purpose of research.The state encourages organizations and individuals to conserve and protect heredity elements toestablish gene bank systems contributing to the biodiversity conservation Until now, manyresearch institutes of MARD have their own gene banks for their research field, such as Maizeresearch institute, Food crops research institute, etc

MONRE manages the database on modified genes and heredity elements of genetically modified

species related to biodiversity Organizations and individuals conduct research to create

genetically modified species have to register with Ministry of Science and Technology

2.2.4 Rural environment protection

In general, the rural environment protection is encapsulated in legal documents such as theEnvironmental Protection Law 2005, Degree 67/2003/ND-CP on environmental protection feefor waste water, and Degree 174/2007/ND-CP on environmental protection fee for solid waste,etc Apart from those, this issue has been also regulated in strategies (Strategy for nationalenvironmental protection up to 2010, the National Agenda 21 on Orientation strategy for

advancing toward sustainable development 2002), National program of the government for cleanwater and rural hygienic development (NPCWRHD), and MARD’s directives such as Directive36/2008/CT-BNN on promoting environment protection activities in agricultural and ruraldevelopment sector.

In the NPCWRHD, rural households have been partially financially supported to constructhygienic toilets In 2005, 50% of rural households had hygienic toilets

MARD collaborates with MONRE, provincial people committees to instruct, monitor theenvironmental protection in agricultural production For plantation, MARD issues the list ofpermitted plant protection chemicals (pesticide, herbicide, insecticide) Departments ofagricultural and rural development collaborate with local authorities to randomly or periodicallycheck the trade and use of these products of farmers and organizations MARD also sets upstandard procedures of using plant protection chemicals to ensure the safety of the products andgood health of farmers However, as lack of monitoring system and effective rewarding-punishment mechanism, the compliance of these regulations is limited

For husbandry and aquaculture, MARD also issues a list of permitted veterinary medicines andsets up the production process (food, cage construction, etc) to maintain the rural environment.Besides, extension service’ projects invest a lot to promote the biogas system However, in 2005,there are only seven per cent of livestock cages having waste treatment system compared to theMARD’s target of 30 per cent Coping with disease in husbandry sector is an important policycomponent recently with many adhoc policies such as Decision 719/QĐ-TTg 2008 of the Prime minister about the supportive policy to prevent and cope with livestock and poultry diseases.For craft village, until now there is no document to instruct the environmental protection in craftvillage Some documents such as Degree 66/2006/ND-CP on craft village development havementioned this issue but lack of specific regulation on waste treatment system Consequently, in

2005, less than one per cent of craft villages have waste treatment system compared to MARD’starget of 10 per cent

3 OPERATIONAL ENVIRONMENT AND KEY ISSUES

3.1 Land use and management

Land fragmentation Egalitarian land allocation makes land holdings very fragmented Until

now, in Vietnam there are only 700 communes in 20 provinces where plot exchanges have beenimplemented (MARD 2002) In Vietnam, it is estimated that there are 70–100 million parcels orplots of land, with around 10 per cent of these plots having an area of only 100 m2 or less (WorldBank 2003) This situation leads to low productivity, and puts constraints on agriculturalcommercialization, application of modern technology, hence affecting efficiency in agriculturalproduction for all farm households Accompanied by imperfect land tenure andunderdevelopment of land market institutions, land fragmentation creates disincentives for goodfarmers to invest in agriculture Though policies to promote land consolidation and accumulationmay lead to certain level of landlessness and rural differentiation, such policies are expected toaccelerate agricultural commercialization and mechanization, and create incentives fortechnology innovation, which are critical for sustainable growth in Vietnam’s agriculture

Inefficient land use by state-owned farms At the moment, in Vietnam there are 314 agricultural

state-owned farms, and 353 forestry state-owned farms who manage about 4.6 million ha ofagricultural land, mostly concentrated in remote and mountainous areas However, the efficiency

of their land use is very low because the management mechanism of these farms does not create

the incentives for farm households to increase productivity In 2006, about 70 per cent of thestate-owned farms experienced business losses.

Frozen land market In reality, apart from the official price system regulated by the state, there is

another ‘underground’ land price system reflecting true market prices which is usually higherthan regulated prices of the state This failure of the land-use-rights market to accurately reflectmarket values restricts the ability of efficient farmers to take advantage of market opportunities toincrease production, and encourage inefficient farmers to leave the sector

Land use tax exemption The Government exempted agricultural land use tax in 2000 In fact,

this tax contributes insignificantly to the government budget at only around 2-3 percent Thoughreleasing financial burden on farmers, land use tax exemption policy might lead to a relaxedapproach to land management and have negative impacts on land use (Anh 2007) Lowproductivity agriculture with tax exemption and land fragmentation creates low incentives forfarmers to utilize and investment on small plots of land In addition, in order to cover theirbudgets from tax exemption, local governments may need to order farmers to pay additional fees

or face a degradation of public service provision

Land accumulation and rural differentiation Vietnam faces a dilemma about this issue On the

one hand, policy makers agree that land accumulation is beneficial because it helps raise theefficient use of land and promotes agricultural commercialization On the other hand, landaccumulation may lead to landlessness, which in turn may be a source of economic and socialinstability

Industrial zone development and sustainability of farmer’s livelihood The government strives

to fill up all the area of established industrial zones and is considering establishing new industries

in a selective manner in Vietnam to increase the total area of industrial zones to about 40,000 to45,000 ha in 2010 At the moment, industrial zones usually compensate a large amount of money

to farmers and promise to recruit them to work in their companies However, due to their lowquality of education and professional skills, most farmers have not been qualified to work inindustrial zones After a certain time, they will run out of compensation money and becomelandless farmers

Forest protection and poverty reduction Forest land is mostly concentrated in the remote and

mountainous areas, where ethnic communities live Communities are hesitant to receive allocatedforest land because their livelihood is not guaranteed when they receive forestry land forprotection purpose It can be seen that apart from timber which need a long time to be benefited,other benefits including non-timber forest products and government’s support are small

Land quality degradation Aiming at increasing their income, farmers have applied strongly

intensive farming practices to improve the production of agricultural land However, thesepractices have also degraded the land quality and productivity, including:

 Overuse of chemical fertilizer and pesticides in cultivation;

 Land erosion due to intensive cultivation on sloping land; and

 Land salinity due to transformation from agricultural land to aquaculture land andunsustainable use of ground water for irrigation and subsequent intrusion by salt water

Climate change and food security According to IUCN (2007), Vietnam is one of the five

countries will be affected most seriously from climate change It is estimated that the Mekongriver delta will lose 40 per cent of agricultural land Moreover, the total output of food production

of Vietnam will decrease by 12 per cent (approximately five million tons) Yet, it seems thatVietnam has not prepared comprehensive land zoning and planning to cope with this danger.

3.2 Water management

Water use inefficiency As water for irrigation and drinking is free or under-priced, it is likely to

be used wastefully by farmers Some case studies in Red River Delta indicate that too much water

in used for irrigation in rice production

Lack of financial budget for maintaining and upgrading irrigation schemes and drinking water supply works Because fees collected for water use are insufficient to cover the proper

maintenance of water storage and distribution systems, the performance of this system declinesseriously This in turn increases the inefficiency for water supply Water users may thus achieve a'false economy' in which they pay little or nothing for their water directly, but as a consequenceare subject to declining income resulting from deteriorating water supply services According toMARD (2006), due to degradation, the current irrigation system only operates at 55 to 65 percent of designed capacity

Governmental budget deficit for water supply services At the moment, as both irrigation and

rural drinking water supply are subsidized, the government has to spend a large amount of budget

to maintain these services

Irrigation Governmental budget: from 2000 to 3000 billion VND yearly

Rural drinking water supply Governmental budget: 4500 billion VND in 2006-2010

Local state budget: 2300 billion VND in 2006-2010

Lack of drinking water supply for rural living Lack of drink water for rural living has led to a

problem causing the inequality between rural and urban population UNICEF and Ministry ofHealth (2008) show that while 76 per cent of urban population has obtained fresh water, only 48per cent of farmers can access fresh water and drilled-well water Although Vietnam isacknowledged as a country redundant in water, about 60 to 70 per cent of water sources isderived from outside That upstream countries like China and Thailand are preparing to constructlarge-scale hydropower dams may seriously change water regime and volume in Vietnam

Water quality degradation As both MARD and MONRE do not have effective policy to monitor

and control pollution sources discharged to water, the water quality is deteriorating Dung ofpoultry and pig has been used to feed fish This results in pollution in ponds, rivers andreservoirs Moreover, the overuse of chemical fertilizers and pesticides also seriously degradesboth surface and underground water resources Moreover, due to dyke system planning andmanagement, salt water intrusion has become a serious problem particularly in Mekong RiverDelta

Impact of climate change According to World Bank (2007), Vietnam will be affected seriously

by climate change The sea level might increase by 0.3 – 1 meter, and then many low areas inMekong River Delta, Red River Delta and Central Coastal will be underwater If the sea waterrises by 1 meter, the flooded areas will be 40000 square kilometres, mainly in Mekong RiverDelta and about 17 million people would be adversely impacted There is no plan or zoning forwater resource to cope with this danger

3.3 Agro biodiversity conservation

Conversion of forest to agriculture is a major cause of biodiversity loss throughout the region In

Vietnam, 50,000 hectares per year of forest are lost to unplanned agricultural clearances, thesame amount to forest fires, and the rest to fuel wood and timber harvesting In response, a large-scale reforestation program is under way Unfortunately, most of the land that is being deforested

is natural woodland, while the reforestation is largely made up of industrial forest plantations ofpines, rubber and eucalyptus that add little in terms of ecosystem restoration Despite worthygovernment efforts for biodiversity conservation, existing programs for protection of forests andwatersheds have not met the need for integrated and sustainable approach to forest andcommunity development

Conversion from farm to non-farm land Due to the industrialization and urbanization, the

agricultural land has been reduced This seriously damages the agro biodiversity

Switching to new varieties and species This poses a danger to traditional

Varieties and species adapted to local conditions, which may have long-term rather than term benefits Modern farming practices that rely heavily on pesticides and chemical fertilizersseriously affect the conservation and use of biodiversity In many parts of the region, suchpractices have displaced traditional rice paddies where fish, frogs, and other species oncesupplemented local diets Few of these species can survive with inputs of pesticides and chemicalfertilizers Issues such as genetically modified organisms are relatively poorly regulated and maypose a risk, especially if Vietnam is used as a testing ground for GMOs

short-Rice monoculture The predominant farming system in Vietnam is rice-based agriculture The

intensive rice production has degraded the soil quality, reduce water volume and increase thecapacity of harmful insect and diseases against plant protection chemicals

Wild animal trade There is increasing trade with neighbouring countries in human and animal

food, medicinal plants, and raw materials for handicrafts and industry, which is difficult tomanage sustainably

Limited definition of agro biodiversity A major weakness in interpreting agricultural

biodiversity issues is that national documents appear to restrict the definition of agro biodiversity

to crop and livestock species and their wild relatives, rather than the broader ecosystems in whichthese exist Such views exclude wild species that provide services to agriculture, such aspollinators, natural enemies, soil organisms, and other species that make up the agro ecosystem

3.4 Rural environmental protection

Lack of monitoring system There is no clear distinction between MARD, MONRE and Ministry

of Health’s responsibilities related to rural environmental management regarding: water qualitycontrol, solid waste management, disease control, etc

Lack of rewarding – punishment mechanism Currently, there is no effective mechanism to

control the farmer’s practices that affect the environment, such as chemicals and fertilizer use,livestock waste treatments, etc

Lack of land fund for pollution control Due to intensive agricultural development policies, the

pollution from pesticides, husbandry wastes and handicraft industries has become serious inmany localities It is reported that local governments cannot implement public-health relatedpolicies, such as relocating animal husbandry and handicraft industries, because no land isavailable for these purposes

Industrialization Industrial zones have increasingly caused serious pollution to rural

environment and degradation of farmer’s health.

Climate change Mekong River Delta and coastal areas will be flooded in the future due to

climate change This would dramatically damage the rural environment due to lack of freshwater, epidemic, etc

4 RESEARCH AND DEVELOPMENT INFORMATION

Main Research Areas

4.1 Land use and management

Farm size and productivity

Some studies using survey data in a number of locations show that small and scattered landholdings distribution hampers technology adoption, leading to more time and labour costs forfarming activities, higher production costs and disputes, which reduce productivity in agriculturalproduction (Hung et al 2004, Blarel et al 1992, Lan 2001, Bentley 1987)

Sally et al (2006), by using survey data in some Northern provinces, estimate the relationshipbetween productivity and fragmentation and farm size based on the approach of productionfunction The empirical results show that the number of plots per farm has negative impacts oncrop productivity, increased family labour use and other farm costs Furthermore, they also showthat fragmentation is a significant factor to force crop diversification

Hung et al (2006) investigate factors affecting the net value of farm production By using aregression analysis, the study shows that the net value of farm production is positively but non-linearly related to farm size, and positively influenced by a higher percentage of better qualitycultivated land and higher education levels of the household head They suggest that policies areneeded to encourage the consolidations of land holdings

Tarp et al (2007) use the household data from 2006 Vietnam Access to Resources HouseholdSurvey to estimate the effects of crop specification on Vietnam's agricultural production Theyfind that such restrictions are widespread and prevent crop diversification Although they find nodirect effect of restrictions on cultivation income, the paper uncovers an indirect effect workingthrough the returns to land titling

Efficiency versus equity of land structure and rural differentiation process.

Land loss is an issue of concern in Vietnam as landlessness or near landlessness is oftenassociated with poverty (ADB et al 2004; Lan 2001; World Bank 2000) Using qualitativeapproach, Oxfam (1999) and AusAid (2003) identify eight reasons for landlessness in Vietnamsuch as inability to return loans, production failures as a result of natural disasters, and healthproblem, etc

Using the Vietnam Living Standards Survey (VLSS) data, many researchers working for theWorld Bank and mainstream international donors have argued that there is no clear signal thatland market has been developed sufficiently to promote strong land accumulation, and theexisting land distribution cannot create serious rural differentiation Van de Walle and Cratty(2003) claim that households that undertake rural non-farm activities have a significantly higherprobability of being non-poor

Ravallion & van de Walle (2001) analyze VHLSS 1993 and conclude that the land allocationprocess under Contract 100 in 1988 and the Land Law of 1993 was not dominated by the rich orinfluential, and results in an egalitarian land distribution However, they found some differences

when using the 1997-1998 VLSS and suggest that some degree of land accumulation by morewealthy and educated households was taking place.

Other studies show that land markets in Vietnam are pro-poor (Deininger and Jin 2003; Ravallionand van de Walle 2003) These authors used VHLSS 1993, 1998 and 2002 to estimate impacts ofland allocation on rural differentiation in Vietnam They claim that land distribution hasimproved in favour of households in the relatively poorer per capita expenditure quintiles.Similarly, Schipper (2003) finds evidence based on the VHLSS 1993 and 1998 to indicatestrongly that the distribution of land has become more equal over the 1990s Moreover, thisconclusion seems to have been confirmed in a number of econometric studies of Vietnam’s landmarket that have examined the panel data in the VHLSS (Joint Donor Report 2003; ADB 2002).Ravallion and van de Walle (2003) argue that the land market serve to iron out some of theinefficiencies in land allocation generated by initial administrative decisions Deininger and Jin(2003) reinforce this finding, and argue that in addition to the equity enhancements generated bythe land market, land transfer have improved efficiencies because the demand for land, either tobuy or to rent, is driven by those households who are more productive but have lowerendowments

In contrast, Akram-Lodhi (2005) argues that rural differentiation in terms of access to land inVietnam proceeded during the 1990s His argument is provided by the case studies conducted inNorthern, Central and Southern Vietnam between 1998 and 2002 He questions how ruralhouseholds were able to finance land purchases when the average price of crop land per hectarejumped from VND 11.9 million in 1993 to VND 26.1 million in 1998 With unequal access tocredit, relatively poorer rural households would not be able to purchase land Consequently, landsales market might be segmented on the basis of wealth

Akram-Lodhi (2004) also provides five findings regarding to land structure and ruraldifferentiation First, overall land markets appear to have been pro-poor, but lack consistency.Second, tenancy relations including sharecropping have returned to rural area Third, landlessness

in rural area is rising Land sales and mortgage losses, along with the growth of non-farmhousehold economy among relatively richer rural households appears to result in thelandlessness Fourth, land fragmentation has increased significantly since 1988 despite theemergence of land markets Finally, there is a clear trend in land concentration in rural Vietnam,which shows the increasing land stratification

Akram-Lodhi (2005) argues that processes of peasant class differentiation are underway, with theemergence of rich peasants with relatively larger land holdings, capital stock and resource to hirelabours This is the key structural feature of the development of capitalism in agriculture, and theevidence further demonstrates the rapid growth of a class of rural landless, who are separatedfrom means of production and survive by selling their labour and are the poorest segment of ruralVietnam

Operation of land market in the linkage with other markets

Most of the studies have covered the development of land-use-right markets in Vietnam Marshand MacAulay (2002) show that although a land-use-right transfer is emerging in Vietnam inresponse to reforms that have given a degree of security and tenure to land holdings, it is stillconstrained They claim that there are official restrictions for land-use-right transactions, whichcontrol the circumstances under which, and to whom, land-use-rights can be transferred.Humphries (1999), Kerkvliet (2000) and World Bank (2003) found that land transfers wereoccurring, but many illegally They show reasons for illegal transactions including costs with

registering land-use-right transactions, time consuming, cumbersome procedures, unclearregulations and opportunistic rent-seeking behaviours.

Mash et al (2006) also found that there was an active market for land-use-right but the level ofactivity varies considerably between provinces Rental transactions are reported more often in theNorthern provinces and sales more often in the Southern provinces

Land is rented out for a variety of reasons, including a lack of capacity to invest in productivityenhancements, fragmentation of holdings, lack of access to labour, economic shocks at thehousehold level such as illness, and because of income and asset diversification into rural non-farm household enterprises (Deininger and Jin, 2003; Ravallion and van de Walle, 2003;Haughton, 2000) Although fixed rents are more common than sharecropping, perhaps the mostinteresting aspect of the land rental market is that in terms of both renting in and renting out it ismost common for land to be leased for free, a finding that requires further research but whichmay be a consequence of the enhanced power of local officials to intervene in the land market as

a consequence of land market legislation (Ravallion and van de Walle, 2003)

4.2 Water use and management

A framework for improving the management of irrigation schemes in Vietnam (ACIAR 2004) By

investigating three case studies in Ha Tay province and Ho Chi Minh City, the project focused onanalysing the operation and management of publicly managed irrigation systems comprising:system operation, asset management, system economics and institutional analysis Findingsinclude:

 Low water productivity: very low output of rice per unit volume of water; and

 Sustainability of financial management for IMCs: (i) They are heavily reliant on governmentsubsidies to carry out their operations; (ii) the level of government subsidies is insufficient toensure the long-term sustainability of IMC assets; (iii) the level of expenditure onmaintenance is consistently below the standard needed to prevent the rapid decay of thecompany assets

Aligning Public Expenditure and Sectoral Institution to cope with Agriculture and Rural Development Challenges (World Bank 2005) The report presents some key findings as follows:

 The trend of irrigation expenditure decentralization, and shifts in emphasis from building newstructures to upgrading and completing existing works;

 Capacity of irrigation and drainage is low; and

 Funding for operating and maintenance irrigation system is not enough

Studying the effective and sustainable irrigation management model for agriculture and rural development (Economic Research Centre - Institute of Science Irrigation, 2007) In this research,

a survey was undertaken on organization and management status of irrigation schemes in 528districts of 53 provinces in Vietnam Main findings:

 Apparatus of state management on exploitation and protection of irrigation schemes is notsynchronized in terms of organization, functions and tasks;

 Administration decentralization is not clear and difficult to operate and manage;

 Organization and management of irrigation model exists in many forms;

 Management sphere of the IMCs is too broad and thus leading to low effectiveness; and

 Unfairness on finance mechanism for IMC

Irrigation investment efficiency

Impacts of poverty reduction to the irrigation expenditure of the large-scale irrigation system in Vietnam (Asian Development Bank and World Bank, 2004).The study assessed the impact of

public investments on (i) rehabilitation of irrigation infrastructure alone, (ii) improvement ofmanagement system alone, (iii) combination between rehabilitation of irrigation infrastructureand improved system management After measuring the changes in water availability, rice yields,farm profits, production cost, production uncertainties, and poverty in three different large-scaleirrigation schemes in the North, Central and South of Vietnam, the research found thatinvestment in both infrastructure rehabilitation and management improvement is more efficient.Policy recommendations included: (i) rehabilitation of existing systems needs to be accompanied

by management improvements in order to realize their design potential; and (ii) for povertyreduction purpose, investment should be preferential to irrigation rehabilitation rather thansystem management improvement

Macro Policy and Investment Priorities for Irrigated Agriculture in Vietnam (International Water Management Institute, MARD and IFPRI, 2004): The research assessed the impacts of

public irrigation investment on the development of agricultural output By conducting aneconometric analysis using data of 54 provinces in Vietnam, the result showed that publicirrigation investment had contributed 28 per cent of total agricultural output growth during 1991-

99 The study concluded that if public irrigation investment would be reduced in the future forother priorities, it was necessary to find other sources for investment

Underground water

Environmental and socio-economic impacts of institutional reforms on the agricultural sector of Vietnam, Land suitability assessment for Robusta coffee in the Dak Gan region (D’haeze et al 2004); and

Groundwater extraction for irrigation of Coffea canephora in Ea Tul watershed, Vietnam - A risk evaluation (D’haeze et al 2004).

These papers show that the over-plantation of coffee results in underground water depletion inDak lak province

Impacts of climate change on water resources

Project ‘Climate change in Asia: Vietnam’, implemented by Institute for Water Resource Zoning – Ministry of Irrigation, and General Office of Hydrometeology (1992-1994) funded by Asian Development Bank Project’s activities include: (i) Monitoring Greenhouse Gas based on 1990’s

data, (ii) Assessing the impacts of climate change on agriculture, water resource, forestry,community health and disaster; (iii) proposing solutions to mitigate the impacts of climate change

in terms of energy, construction, transportation, agriculture, forestry, and land use; and (iv)proposing policy to cope with climate change

Project ‘Assessing the vulnerability of coastal areas in Vietnam – Phase 1’, implemented by General Office of Hydrometeology under the fund of Netherlands’s Government (1996) The

research assessed the vulnerability of all coastal areas of Vietnam under the impacts of sea levelrising and outlined some initial steps for the general management of coastal areas in Vietnam.The provinces selected included Nam Dinh, Thua Thien Hue, and Ba Ria Vung Tau

Flood in Mekong River Delta, Nguyen Huu Ninh (2007) This research presented an overview

about (i) climate change and flood; (ii) the current state of disaster management and adaptation toclimate change The report indicated that in long-term, climate change would affecthydrographical regime and the social economic development of Mekong River Delta AlthoughMekong River Delta is abundant at natural resources and has great potential for development, thepoverty in this region would be a big challenge to cope with climate change The most vulnerablesector should be agriculture, aquaculture and forestry

4.3 Agro biodiversity conservation

Hannal, D, Managing Agricultural Resources for Biodiversity Conservation – Case studies for India, Philippines and Vietnam (2001): Although in Vietnam indigenous domesticated crops and

livestock hold a rich diversity of species and varieties, and other organisms around them hold thekey to healthy agro ecosystems, little has been done to catalogue, conserve, and promote them.Indeed, many are in the process of disappearing as biodiversity traditional agricultural systemsare replaced by monocultures of high-yielding, high-risk exotic species and varieties, often withdisastrous consequences

MONRE, Vietnam Environment Monitor – Biodiversity (2005) funded by World Bank: This is a

national report of MONRE that provides an overview of the biodiversity situation in Vietnam.The Monitor provides an assessment of biodiversity status and trends, highlights key issues, andidentifies experiences and lessons which can guide decision makers in setting priorities for futureaction to improve the management of Vietnam’s ecosystems, species and genetic resources

Nguyen Thi Ngoc Hue et al., Instruction of agro biodiversity conservation in Vietnam (2008) funded by IUCN and Danish Government: This research was based on the framework of a similar

study conducted in Thailand This provides readers with information about the general situation

of biodiversity and threats to biodiversity in eight ecological systems in order to help agriculturalstaff and local authorities to protect and sustainably use this kind of natural resources

4.4 Rural environment protection

Rural Environment

Project KC 08.05 of Ministry of Science and Technology on studying Vietnam’s rural environmental issues in specific ecological zones to forecast the evolution, propose policy and monitoring solutions (2004): implemented by Dao Can et al The research covers: (i) general

natural conditions of eight ecological zones; (ii) exploitation situation of natural resources, (iii)Health condition and rural environmental sanitation, (iv) policy recommendation

Nguyen Dinh Huong, Nguyen The Chinh (1999) using the Input – Output model to study the

relationship between economic growth and production wastes in Red River Delta The resultsshow that the correlation between economic growth and production wastes is statisticallyinsignificant

Craft villages

Project KC 08-29 of MONRE on studying the scientific and practical basis for designing policy

and solutions to solve environmental problems in Vietnam’s craft village (2005) implemented by

Dang Kim Chi et al The research group conducted interviews and biological-physical-chemicalexperiments to examine the pollution level of 52 craft villages The results show that 46 per cent

of craft villages have serious pollution (water, soil or air), 27 per cent are medium polluted and

27 per cent are lightly polluted

Research project of MONRE (2000) on assessing the pollution situation of some craft villages in

Ha Tay, Bac Minh and Hung Yen provinces and suggest policy to reduce pollution implemented

by Dang Kim Chi et al The results shows that the environmental quality of most craft villageswere below the national standard Workers had to work in dangerous conditions: 95 per centdirectly contact with dust, 85 per cent with high temperature, and 60 per cent with chemicals

Impacts of agricultural production

Nguyen Huu Dung (1997) Investigating the Impacts of Pesticide Use in the Mekong Delta

The study involved 180 farmers, who were surveyed during the 1996 winter/spring rice growingseason Dung found that more than 90% of farmers in the Mekong Delta use pesticides (such asinsecticides, herbicides, fungicides, and other chemicals), including several products that haveeither been banned or restricted because of their toxicity Although approximately 65% of thesurveyed group is able to read instruction labels, just 39% actually understand and follow thedirections As a result, most farmers do not wear protective equipment such as rubber boots, facemasks, and long sleeves, preferring to work in traditional shorts and singlets

5 KEY POTENTIAL RESEARCH POLICY ISSUES

Includes research and policy advice on:

 Complete set of database on land use efficiency, land transaction, and land and incomedistribution, water supply and demand, agro biodiversity, factors related rural environment(quality of air, solid waste, farmer health, etc.);

 Analysis on land use efficiency: (i) measurement of agricultural productivity and economies

of scale in agricultural production; (ii) optimum level of farm size and land plot;

 Analysis on the relationship between land accumulation and rural differentiation: (i)dimensions of rural poverty and income inequality in particular; (ii) causality between landdistribution and rural differentiation; (iii) impacts of land policy on rural income andinequality;

 Analysis on the operation of land markets: (i) transaction costs of land transactions; (ii)equilibrium of land market; (iii) administrative controls over land transactions; (iv) linkagesbetween land markets with other markets (commodity, labour, capital); (v) farm householdbehaviours to rent-in/out land;

 Analysis on irrigation and drinking water demand and supply capacity;

 Analysis on efficiency of irrigation and drinking water supply institutions;

 Study on the market operation for irrigation and drinking water supply services;

 Study on water resource zoning and planning;

 Study on the economic impacts of agro biodiversity on agricultural production (the role ofpollinators on production yield, the relationship between agro biodiversity and plant andhusbandry diseases);

 Conduct the analysis on impacts of genetically modified application on agriculturaldevelopment;

 Study on the impacts of agricultural production on agro biodiversity;

 Study on the impacts of agricultural production on rural environment (use of plant protectionchemicals and fertilizer, husbandry waste, craft village’s wastes on rural environment,farmers’ health); and

 Study the impacts of quality of rural environment (quality of soil, air, water on agriculturalproduction yield, farmer’s income)

Research providers

Many research institutions have conducted studies related to natural resources and ruralenvironmental management so far, including:

MARD: Water Resource Research Institute, Aquaculture Research Institute, National Institute for

Agricultural Projection and Planning, Rural Planning and Zoning Institute, Vietnamese Academyfor Agricultural Science, Southern Institute for Agricultural Science, Institute of Policy &strategy for Agriculture and Rural Development,

MONRE: Institute of Hydrometeorology and Climate Change, National Hydro-Meteorology

Centre, Institute of Strategy and Policy for Natural Resources and Environment, LandManagement Research Institute

Universities: Hanoi National University, Water Resource University, Hanoi Agricultural

University, Hanoi Polytechniques, Ho Chi Minh Agriculture and Forestry University, Can ThoUniversity

Government: Vietnam Union of Science and Technology Associations, Institute of Environment

and Sustainable Development (Vietnamese Academy of Social Sciences), Ministry of Health,Ministry of Science and Technology, etc

Others: ABARE, World Bank, IFPRI, ACIAR, International Water Management Institute in

Southeast Asia, UNESCO, FAO, UNDP, WHO, IFAD, UNICEF, WMO, etc

IPSARD Capacity

At this moment, natural resources and rural environmental management issues are still quite new

to IPSARD researchers The institute has only implemented 3 quantitative pilot research projectson: (i) impacts of land policy on ethnic minority groups in the Central Highland; (ii)transformation of paddy land to industrial and commercial land in Ha Tay province; (iii) impacts

of irrigation fee exemption on farmer’s livelihood IPSARD has made some statisticaldescriptions and qualitative report on land conflicts and land accumulation process in Vietnam Inaddition, IPSARD is going to collaborate with Harvard University to conduct case studies toserve urgent needs of MARD leaders to reform land policies

Needs include: (i) comprehensive information, database and fieldwork skills to conduct surveys

on natural resources and rural environmental management issues (ii) strong support for theexpertise and experience to formulate research issues, questionnaires and survey methods onnatural resources use and rural environmental management (iii) certain skill in regression andimpact assessment techniques (iv) technical support for applying quantitative techniques for theanalysis on land use efficiency, poverty and inequality, bioeconomic simulation models for water,agro biodiversity and rural environment management

6 SWOT ANALYSIS

Common Issues

 Many government polices formulated to

address natural resources and environmental

issues

 Certain levels of established legal and

regulatory framework for land, water,

agro-biodiversity, and rural environmental

management;

 Certain level of established institutions for

land, water, agro-biodiversity, and rural

environmental management;

 Certain development of rural public social

services, and the ability of farmers to invest

more on natural resources and rural

environmental is likely to increase compared

 Unclear natural resources ownership, low capacity for natural resources use and environmental management planning, low capacity for natural resources management and administration;

 Lack of market institutions for natural resources (land, water, biodiversity) and environmental services;

 Government’s slow progress in reforming natural resources and rural environmental management policy

 Lack of coordination between agencies responsible for management of natural resources and environment

 Red-tape and corruption behaviours of government staff and state-owned farms, who will resist against the reform toward a more transparent and market- oriented natural resources policy

 Limited awareness of farmers and relevant actors

on newly emerging issues: effective use of water, rural environment protection, agro-biodiversity conservation.

Land Use and Management

 Equal land distribution, and income distribution;

 High, but declining area of land ownership or

use by rural households

 Flexible regulations allowing a variety of

options for good farmers to accumulate land

resources (transfer rent etc)

 Reduction of area farmer by state-owned farms

is falling, resulting in increase rural household

use rights

 Allocation of production forests to households

and protection forests to communities should

result in improved land use

 Demand for land, either to buy or rent is driven

by households who are better educated, more

productive and have lower levels of debt.

 Farmers have a habit to contribute a high level

of resources for community purposes such as

environmental production activities in rural

areas, by comparison with most other countries.

 Land holdings very small and fragmented with a low level of plot exchanges and land aggregation seen as hindering more commercial agricultural productions systems, diversification and the adoption if advanced technology

 Small holdings and lack of credit discourages good farmers investing more in agriculture

 Land aggregation may lead to an increasing level

of landless farmers

 Poor land use/rights market with prices often well below market prices reduces opportunities for good farmers to expand their operations and poor farmers to exit

 The sale of rural land for industrialisation, often at less than market prices and the relatively poor skills of ex-farmers for industrial work also increases the number of landless farmers.

 Exempting land tax may result in inefficient or low productivity options for land use

 Efficiency of land use of state owned farms is low,

and their management mechanism does not provide incentives for households to increase productivity About 70% of state owned farms are unprofitable.

 Low availability of credit at the household level and a relatively high level of household debt

Water Use and Management

 Development of Irrigation Management

Companies some of which have been equitized

 Development of Water User Groups with

ability to collect fees for IMCs for operational

and maintenance costs

 Large government budget for irrigation and

drinking water supply

 Farmers are currently exempt from irrigation fees for IMCs furthers worsening a situation where fees provide less than half the operation, management and maintenance costs, resulting in severe degradation of irrigation systems.

 In spite of government budget lack of resources for maintaining and upgrading existing irrigation schemes results in lowered water access and inefficient water utilisation

 Low water productivity from rice and cotton (low output of rice per unit of water) compared with other more profitable crops

 Policies and compliance with regulations for controlling sources of water pollution, both urban (industrial) and rural, has severely impact on water quality

Agro-Biodiversity Conservation

 Establishment of gene banks

 Data base of modified genes managed by

MONRE and GMOs registered with MoST

 Little coordination, consolidation of gene banks resulting in duplication in some instances and major gaps in others.

 Management and control of spread of GMOs introduced for research purposes is limited.

 Regulations relating to agro-biodiversity restrict definitions to crop and livestock species rather than the ecosystems within which they exist

Rural Environment Protection

 Regulations on rural environmental protection

is strong

 Development of biogas systems for livestock

heavily promoted by national and international

agencies

 Farmers have a habit to contribute a high level

of resources for community purposes such as

environmental production activities in rural

areas, by comparison with most other

countries.

 Recognition of the impacts of climate change

on land use options in the future and large

national and international resources directed at

researching the impacts and remediation

options

 Poor rural environmental monitoring systems and reward/punishment mechanisms reduces compliance with and impact of regulations

 Larger scale producers are the main adopters of biogas, with less than 10% of rural livestock producers with waste treatment systems

 Regulations for waste treatment and environmental protection for craft villages weak and poorly enforced

 Lack of budget Rural infrastructure for environmental protection degrades;

 Overuse of fertiliser and pesticides, inefficient use

of irrigation water, intensive cultivation on sloping lands and unsustainable use of ground water resulting in salination all increase land degradation

 Households have little incentive/rewards for managing protection forests as their livelihood is not guaranteed

Challenges

Common Issues

 Government’s intention to promote rural

transformation and decentralization of

industrialization and urbanization, and the need

to reform natural resource and rural

environmental management policy

 Government’s intention to pursue of sustainable

rural development by strengthen natural

resource and rural environmental management

policy

 Improved government capacity for natural

resource and rural environmental management

and administration

 More investment in agriculture and rural sector

from the government and donors.

 Develop databases for land management

administration, water management

agro-biodiversity and rural environment management

 Policies for development of market-based

institutions for natural resources and

environmental services

 Develop national awareness campaigns on

major environmental protection/enhancement

issues

 Strong industrialization and urbanization, and loss

of agricultural land, degradation of water quality, agro biodiversity and rural environment

 Climate change and low capacity of government and farmer to cope natural disasters

 Limited funding is available for natural resources and environmental management investment in Vietnam from government revenues and international finance.

 Tradeoffs between economic growth and environmental quality

 Coordination of resources available for climate change research/remediation options, use of land zoning and planning to cope with climate change is weak

Land Use and Planning

 Analysis of impacts of market oriented land

transfer mechanisms and land aggregation on

productivity, investment in agriculture and

 Management of risks (debt, health etc) is poor and together with small land holdings, tends to increase the number of very poor landless farmers who survive by selling labour.

Water Use and Management

 Evaluate the potential return on investment from

rehabilitation of existing irrigation schemes

compared with construction of new schemes

 Analysis of the impacts of fees for water use on

profitability of IMCs, capacity for improved

maintenance and upgrading of existing

irrigation systems and farmer choice of

enterprises and profitability.

 Development of water use efficiency models

and crop recommendations for effective use of

water

 Analysis of the contribution of rural waste

(animals, fish, crop and agricultural chemicals)

on water quality

 60 – 70 percent of water sources are initiated outside Vietnam’s boarders and therefore control

Agro-Biodiversity Conservation

 Policy and strategy for effective and efficient

coordination and management of agriculture

gene banks

 Pilot studies on impacts of ecosystem

conservation and management on ecosystem

bio-diversity

 Industrialisation, monoculture farming and forestry systems and over-use of agriculture chemicals impact negatively on agro-biodiversity

 Rich rewards and low detection of trade in wild and endangered animals and plants threatened bio- diversity

 Public apathy

Rural Environment Protection

 Analysis of impacts of transfer payments and

penalties on environmental protection

 Drive from Provincial governments for economic growth at the expense of environment and conservation

 Public apathy

EPRO 3: RESEARCH, TECHNOLOGY DEVELOPMENT AND TRANSFER

DELIVERY SYSTEMS FOR AGRICULTURE AND RURAL

DEVELOPMENT DATA SHEET

1.1 National Goal or Purpose

To develop a legal framework and policy environment to enhance the quality, access and impactagriculture services that are responsive to stakeholder needs, is market driven and cost effective(i.e delivers good Return on Investment)

3 Recommendations on the scope of regulatory and process reform that will achieve thenational goal

1.3 Coverage

The focus is agriculture research and extension servicesprovided by the state, social and politicalinstitutions, and enterprises (state owned or private) at the national and grass-roots level butshould also take into consideration other similar rural service delivery systems such as:

(i) other production services for rural actors (irrigation, plant and animal health);

(ii) (ii) social services (healthcare, electricity, water, education, etc.) and

(iii) (iii) business services (credit, tourism, etc.).

2.1 Introduction

The Communist Party of Vietnam (CPV) and the Vietnamese Government recognizes the role ofscience and technology (S&T) have confirmed that S&T is one of the fundamental factors anddriving forces for industrialization and modernization The contribution that S&T has made tothe development of Vietnam’s ARD sector in the past is clearly acknowledged by the State TheGovernment has issued several policies to enhance S&T development in attempt to increase therelevance of research outputs and the efficiency of investment Vietnam is undergoing rapidchange as the country moves away from a focus on increased production volumes towardsincreasing production value Government priorities are now increasingly focusing on strategies toenhance the competitiveness of agricultural products in the domestic and export market

2.2 Policy & Regulatory Framework

Research

The objective of GoV is to increase the relevance, efficiency and impact of government-funded

research that will contribute to the sustainable development of the agricultural sector Importantregulations include:

Resolution No 2 of the Eighth National Congress of CPV in 1996 provided the strategicdirection for science and technology to contribute to national modernization objectives Theresolution confirmed the important role of S&T to national development and directed S&Tdevelopment objectives till the year 2020 The importance of basic research wasacknowledged yet greater emphasis given to improving the impact of applied research.Important strategies suggested in these guidelines include:

 Increasing investment in S&T sector up to 2% of total state budget and policies and taxincentives to encourage private sector investment and to develop personnel and scientificassets and to allow research institutions to engage in commercial activities

 Effectively utilize international support to improve capacity and research facilities and accessstate and donor funds for foreign training & education

 Review of research governance & management mechanisms in order to improve efficiency andeffectiveness of research delivery systems

 Capacity development, strengthen organization structure and enlarge S&T information sources

 Personnel policies that provide for reasonable remuneration, recognizes scientific excellence,improves capacity and research facilities and integrates with the international sciencecommunity

Law on Science and Technology in 2000 ensures the State roles in making investment inbuilding and development of the domestic S&T capacity as well as creating favourableconditions for all other organizations and individuals to participate in S&T development andtransfer Important strategies include:

 Government will create preferential policies (e.g tax credits, IP protection) designed toencourage private investment in S&T

 Award system established to recognize outstanding contributions to S&T by organizations andindividuals

 Research and development institutions can be (i) national-level research and developmentinstitutions set up by the Government, (ii) ministerial-level, provincial-level and the likeinstitutions set up by decisions or authorization of the Prime Minister, and (iii) grassroots-levelinstitutions set up and operating according to law provisions

 The state will use priorities to create an investment budget for S&T which focuses on fundingfor priority scientific and technological task and basic research at the national level and is open

to all registered research providers and individuals (public & private)

 The State ensures a gradual increase of the budget for S&T development and simultaneouslycalls for investment capital from organizations and individuals to S&T activities

 Build and develop the S&T market, through policies and legislation on intellectual propertyprotection and ownership and technology transfer, applying rewards and prizes andpreferential policies to organizations and individuals who apply and/or create patents,innovations, technical improvements

Directive No 63-CT/TW dated 28th February 2001 on promoting S&T research andapplication in service for the agriculture and rural industrialization and modernization cause

 The State to intensify investment for some key S&T centres, especially for biotechnologycentres, to make breakthrough in breeds, production, processing and preserving procedures forimproving productivity, quality and competitiveness of Vietnamese agri products.

Directive No 63-CT/TW dated 28th February 2001 promotes S&T research and technologytransfer as a critical component for the industrialization and modernization of the agriculturalsector Main points include; Encouraging agricultural processing enterprises to apply newtechnologies; policy incentives to stimulate greater interest and investment in new technologydevelopment/research innovation; increasing focus on biotechnology and strategies to supportthe development of biotechnology centres and skill development

Decree No 115/2005/ND-CP dated 5thSeptember 2005 on regulating the autonomy and self management mechanism applicable to public scientific and technological organizations It isaimed at (i) enhancing responsibility and activeness, dynamism, and creativity of S&Torganizations; (ii) creating conditions for combining scientific research and technologicaldevelopment with production, business and human resource training; (iii) focusing investmentfor S&T organizations; and (iv) improving operation efficiency of scientific and technologicalorganizations, contributing to enhancing the national scientific and technological potential.Key points include:

- Restructuring of all scientific research and technological development and serviceorganization into either (i) self-financing scientific and technological organizations or (ii)scientific and technological enterprises, or will be merged or dissolved

 Only scientific research organizations engaged in basic research or research into strategiesand policies will be funded from the State budget for regular activities

 STOs will make decisions on tasks conducted, source of funding (including borrowing),contracts bid for, and method of carrying out activities, signing of contracts with domesticand foreign organizations and individuals, international collaboration, and entry into jointventures They will also have greater control of staffing decisions such as recruitment,reward and termination of staff

MARD Decision 36: No 36/2006/QD-BNN dated 15 May 2006 of the Minister of Agriculture

and Rural Development with associated regulation on the Management of scientific and technological researches and projects of the Ministry of Agriculture and Rural Development is

potentially a very important document for implementation of research programs in the ASTsector

 Research is classified as:

 National level tasks (managed by MoST under the national and internationalcollaboration programs);

 Ministry level tasks (MARD core activities); and

 Grassroots level tasks (proposed by academies or research organisations and approved

by the Ministry)

 Decision 36 provides no regulations on how the research delivery system will be governedbut it clearly states that within MARD, STED is authorized to manage the research cyclefor ministerial level and grassroots projects

 Regulations outline the structure of the reformed delivery system in which governance,management and provision of research services are separated have been submitted to theVice-Minister for review

 It is proposed that the majority of MARD research funds will be allocated through acompetitive grant scheme linked with national level research priorities for the agricultureand rural development sector

 Decision 930/2005/QD-TTg on 9th

September 2005 provides a framework for restructuringscientific organizations under the Ministry of Agriculture and Rural Development (MARD) 6large research institutes, comprising of (1) Vietnamese Academy of Agricultural Science, (2)Vietnamese Academy of Forestry Science, (3) Vietnamese Academy of Irrigation Science, (4)Institute of Policy and Strategy for Agriculture and Rural Development, (5) Institute ofHusbandry and Veterinary, and (6) Vietnamese Institute of Agricultural Engineering andPost-harvest Technology, will be established

 Decree No 80/2007/ND-CP dated 19th

May 2007 provides detail on preferential supportpolicies to science and technology enterprises such as income tax reduction and exemption,and details of regulation procedures for setting up S&T enterprises under the Law onEnterprises

 Decision No 11/2006/QD-TTg dated 12th

January 2006 on approval of a key program onbiotechnology development and application in agriculture and rural development up to 2020.The decision also provides the development vision for the biotechnology sector until the year

2020 as well as specific targets and tasks for each period, which can be seen as guidelines andresearch priorities for the sector

 Decree 112/2003/NĐ-CP;in February 2008 relating to establishment of National Foundation for Science and Technology Development

There are many other legal documents including the inter-ministerial circular No.12/2006/TTLT/BKHCN-BTC-BNV dated 5th June 2006 on providing guidelines forimplementation of the Decree 115, the Agriculture Development Plan for the Period of 2006-

2010, Master Plan for the Agriculture Research in Vietnam 2001, Decree 112/2003/NĐ-CP, etc

Extension

 Decree No 13/CP dated 2nd

March 1993, set up the extension system nationally Since then, ithas undergone several phases of restructuring

 Decree No 56/2005/ND-CP relating to rules and regulations on content, principals,organisation, and budget policies on agriculture and fisheries extension

 Decree No 86/ND-CP in 2003, resulted in a ‘socialization of extension’ policy by.Accordingly, the National Agricultural Extension Centre (NAEC) was established Inaddition, the National Fisheries Extension Centre was also established by the issuance ofDecree No 43/2003/ND-CP dated 02ndMay 2003 by the Prime Minister.

 Circular 30/2006/TTLT-BTC-Bnn-BTS – Instructions on management and use of economicactivity fund for agriculture and fisheries extension

 Circular 50/2007/TTLT-BTC-BNN-BTS – amendment to Circular 30, on instructions to useeconomic activity fund for agriculture and fisheries extension

 Circular 78/2007/TT-BNN – guidelines to implement agricultural, forestry and fisheriesextension and support for production of breeds and commodities regulated by the NationalPro-poor Program 2006-2010

 Decision 37/2008/QD-BNN on the procedure on management of national agriculturalextension programs and projects

 Decree 01/2008/ND-CP dated 3rd

January 2008 on functions, duties, rights and organizationalstructure of the MARD officially establishes the National Agricultural-Fisheries ExtensionCentre based on the merging of the two former centres of National Agricultural ExtensionCentre and National Fisheries Extension Centre

 Decree No 236/QD-BNN-TCCB dated January 29th

2008 to establish the NationalAgricultural and Fisheries Extension Centre (NAFEC) by merging the National AgriculturalExtension Centre and the National Fisheries Extension Centre

3 OPERATIONAL ENVIRONMENT & KEY ISSUES

3.3 Science & Technology Development and Transfer (Common issues)

 Investment for S&T currently accounts for approximately 2% of the total State annualbudget The total investment for S&T is still very low, especially from enterprises/privatesector By comparison this is much less than other regional countries and although the S&Tsector has contributed to the country’s modernization and industrialization cause in recentyears, the return on investment is low and behind that experienced in other countries in theregion

 S&T research and extension delivery is predominantly a State function and the perception isthat the return on the capital invested is poor

 Adequate human resources within the S&T sector remain a problem The sector lacksleading scientists, researchers and skilled extension workers, particularly at the grass-rootslevel

 Research facilities and equipments for research institutes and universities are insufficient,backward and desynchronized S&T service system, including S&T information, technologytransfer consulting services,

 IPRs, quality measures and standards are under-developed both for infrastructure and ability

to match user demand

 There is a large gap between S&T potential and results in Vietnam The ratio of researchersand scientists to the population is low resulting in a low investment per capita and there arefew research and extension workers who meet international standards

 Inadequate and rigid S&T management mechanisms are restraining scientists, researchersand organizations to develop and create The technological market has not yet fullydeveloped.

 The capacity to deliver research and extension outputs that are relevant to the needs of users and thus uptake rates and returns on research investments have been low

end- Production push technology development and transfer has disregarded product quality,value adding, and food safety and has generally failed to address biodiversity andenvironmental issues

3.1 Research

 The quality and impact (return on investment) of R&D outputs are low due to (i) poorrelevance; (ii) supply rather than demand driven; (iii) relatively low adoption rates (iv) lowpotential for commercialization of products and (v) lack of incentives for research andextension workers

 The benefits accruing to the state low because of (i) poor returns on their investment; (ii)agriculture’s lack of competitive advantage compared with other regional and internationalcountries, and in the domestic market; (iii) low contribution of the S&T system to achievingnational objectives for growth and sustainable development in the agricultural sector

 Poor monitoring and evaluation practices for S&T research and development which result inresearch outputs that are often inefficient and irrelevant Funding decisions are not criteria(priority) based; monitoring is top-down with no independent evaluation

 Poor collaboration between public R&D organizations and the private sector

 For many services, the private sector supplies services with higher quality and at a lowercost than the state However, the private sector only participates in the services that areprofitable and are within their capability

 The regulations promote demand driven, open contestable research management systemsbased on national research priorities with output based contracts and accountability forquality delivery by semi-autonomous research institutions, but so far practices have notsignificantly changed to meet these outcomes

 Existing MARD research institutions are the major beneficiaries as they have beensponsored by the State budget with guaranteed income regardless of the impact of theirresearch (i.e funding for research has not been output-based)

 There is a lack of competition with the private sector as preferential government policieshave meant that the majority of S&T funding is channelled through government researchinstitutes or SOEs

 Research and technology is not demand-driven and therefore lacks relevance to end-usersand as a result of this, S&T providers have not yet been encouraged and motivated to createcommercial S&T products

 The key stakeholders that would benefit most from an improved policy environment are theend-users of S&T research and the State as research funded will be more relevant, efficientand effective

 The policy directions of the CPV and the State are clear but are not yet realized, andinstitutionalized as the management capacity of many S&T agencies is inadequate and

economic management mechanisms do not create favourable conditions for S&Tdevelopment, and investment for S&T research.

 Existing laws governing the protection of Intellectual Property Rights (IPR) cannot beadequately enforced and therefore scientists and researchers are not protected from IPviolations which act as a disincentive to new technology development

 Little or no consultation with stakeholders has resulted in S&T outputs that have little or norelevance to end-users This has the potential to act as a significant psychological barrier tothe development and adoption of new technologies in the future

 Due to particular difficulties in the ARD sector, female scientists and researchers accountfor a lower rate than their male colleagues and mainly occupy lower positions than the maleones

 Management capacity of S&T managing agencies is inadequate;

 Economic management mechanisms do not create favourable conditions for S&Tdevelopment;

 A lack of national-level research priorities developed through consultation with stakeholderswhen coupled with an uncompetitive and inefficient mechanism for allocating researchfunding, has demonstrated low returns on investment for Government funds and theproduction of research outputs that remain largely irrelevant to end-users

 Effective technology transfer is requires improvement so that research outputs can betransferred to clients in the private sector which includes commercial farmers, smallholdersand the developing agribusiness sector

 The extension services of NAFC include: training, farm or business advisory, technologydemonstration, and information and communication support The purpose of agriculturalextension work is to improve farmers technical know-how, raise the efficiency of farmingoperations, improve the lives of rural families, and develop rural society

 The delivery of agricultural and fisheries extension services is multidisciplinary andinvolves farmers, fishermen and their organizations, as well as those engaged in food andnon-food production and processing, including both the private and public sector

 According to a survey carried out by IFPRI-MARD in 1999, the state extension servicecould meet only about 15% of the farmers’ needs for agricultural and forestry services

 The focus of agricultural extension remains a one size fits all approach to technologytransfer which ignores traditional knowledge systems or capacity of farmers to absorb newtechnology

 At present the majority of extension and technology transfer services are provided by theState