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MAIN CONTENT...8 2.1 Vietnam’s rice exporting overview...8 2.2 Vietnam’s rice production and export performance...10 2.3 Export rice by market...14 2.4 Other countries’ rice export perfo

Table of Contents

I INTRODUCTION 3

1.1 Ratio/ Background 3

1.2 Objectives 5

1.3 Methodology 6

II MAIN CONTENT 8

2.1 Vietnam’s rice exporting overview 8

2.2 Vietnam’s rice production and export performance 10

2.3 Export rice by market 14

2.4 Other countries’ rice export performance compares to Vietnam 16

2.5 Policy of destination countries which influence Vietnam’s rice export 17 2.5.1 European Union Market 17

2.5.2 China market 19

2.5.3 The Philippines Market 20

2.5.4 Singapore Market 21

2.6 Recommendation policy to increase the advantages of Vietnam’s rice export 21

III CONCLUSION 24

REFERENCES 25

Analysis of Vietnam

rice export performace

Market and Price Analysis Groupwork

I INTRODUCTION

1.1 Ratio/ Background

Food is a primary requirement for human to stay alive and a basic need to fulfillother necessities No countries can maintain their economic growth without solvingfood security issues (Timmer in Azziz 2006) From all types of foods that humanconsumed, rice is the most widely consumed staple food of human population As acereal grain that originally coming from Asia and Africa, rice is the third largestworldwide agricultural production after sugarcane and maize in 2014 (FAOSTAT2017) Seeing the important role rice has and added with technology development, alot of countries have already planted this commodity considering their ability to growand broader consumer scope According to FAO (2016), most of major paddyproducers are in Asia, led by China, India, Indonesia, Bangladesh, Vietnam, so do theconsumers

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Figure 1 Production of Rice, paddy : top 10 producers (average 1994-2016)

Source : Food and Agriculture Organization of the United State

On the other side, in term of international trade, the main players in rice globalmarket are a bit different with those from production/ consumption According toCendrowski (2013), there are less than 8% of rice produced traded internationally.One of the reasons is the two largest rice producers (China and India) consume themajority of the rice they produced, leaving only little to be traded internationally.According to FAO (2017), the top exporters of rice are included Thailand, Vietnam,India, Pakistan and United States while China, Myanmar, Australia, Paraguay andUruguay estimated to lift their export in the future The importer countries, on theother hand, are including many countries, mainly in Asia, such as Bangladesh, thePhilippines, Indonesia, Malaysia, Saudi Arabia, Iran, Iraq with particular China(Mainland), in the future, forecasted include this category too

Vietnam was an importer of rice in 1980s, but has transformed to be one of thetop exporter of rice since 1990s Since then, rice has played an important role in

Vietnam’s economic growth, such as stabilizing national consumption, source ofemployment as well as increase national revenue through international trademechanism The average yield for paddy in Vietnam is currently 4.3 tons/ha with led

by Mekong Delta and Red Delta area At the same time, in international trade scheme,Vietnam has a comparative advantage in term of cost-competitiveness and theexchange rate According to Worldstopexports.com, in 2016 Vietnam was the top fifthrice exporter country in term of dollar value which worth around $1,6 billion or 8% oftotal rice export Hence, realizing the important role of rice in the Vietnam’s economy

as well as the global market, the analysis about Vietnam’s rice export is needed to bedone

1.2 Objectives

The contribution of Vietnam's economic reform in 1986 is considerable andpaved the way for the country to implement its trade liberalization policy and toestablish trading relations with over 150 countries By investigating the Vietnamesetrade pattern with the world, we are able to track the precise trade trajectory of thecountry in several specific periods, which also enables relevant trade policyrecommendations to be formulated for policy makers

Exports play an important role in Vietnamese trade, helping to increase thenational GDP and to improve the position of Vietnamese firms in the global valuechain Such an improvement of Vietnam's position in the global value chain meansbeing higher in the chain rather than carrying out simple processing at the low-end Ifthe production factors which include labor, capital, and fixed assets are analyzed inrelation to firms' exports, plausible assessments of Vietnamese firms' contributions tothe global chain can be determined It should be also noted that the country's tradepolicy reform has affected the structure of Vietnam's exports during periods, has beensubject to the effect of the volatile world's trading market and the effect of anemerging giant exporter such as China

Through this assignment, we will solve some target:

1 The history of the developing of VietNam rice export

2 The trend of Vietnam’s rice export

3 The Vietnam’s rice export compare to competitors in the global rice market

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4 Some policies about import of Vietnam’s export partners.

5 The recommended policy to increase the competitive advantage of Vietnam’s riceexport in global trade scale

1.3 Methodology

The dissertation studies export trade of a single country namely Vietnam Vietnam, asmall and emerging country in South East Asia, has been implementing its economicreforms and trade liberalization for nearly 30 years Opening up its domestic market, it is

an important tool for the country to benefit and to create trade relationships with over 150country partners both developed and developing However, stimulus factors for thecountry's trade may change for subjective and objective reasons The effect of regional andglobal economic integration on the export trade of country members may change frompositive to negative or vice versa particularly if a country is considering opening itsmarket to a larger market association

This paper will analyze by using the secondary data The data will be collectedfrom various sources to support the paper, such as FAO (Food and AgriculturalOrganization) database, database of General Statistics Office of Vietnam, WTO(World Trade Organization) database, related journal and other The data will beanalyzed using descriptive analysis method

The diversity of Vietnam's export products and the destination markets includealmost all countries of the world We have used the synthesized database of the GSO,which demonstrates a structural change of Vietnamese exports between 1986 and 2012

We applied a qualitative methodology which is helpful in depicting a complete picture ofVietnam' exports Moreover, for firms' exports, we also show determinant factors in thetable of descriptive statistics, which summarizes a sample of sub-populations that thesample of three export sectors.

The qualitative method we applied in the dissertation was to carry out a literaturereview In fact, our contribution to the dissertation is to develop or continue a currentbranch of research We show our findings rather than replicating of previous authors'ideas As such, this dissertation mentions the two main strands of literature on the gravitymodel of export trade including theoretical and empirical papers This model criticizes andreviews the overall trade pattern of any country pair in so far as each country differs fromthe other because of the effect of the two main factors the national income and thetransport cost proxy, which is the geographical distance

For quantitative methodology, our dissertation used export trade data at country andfirm level to test hypotheses for each determinant including firm and sector effects Unlikethe qualitative method, the quantitative method allows us to draw conclusion about thewhole population providing the sample of sufficiently large Since firms' export intensitystrictly lies in the unit interval, we transformed it into the type of logit then attemptedwith the OLS and quantile regression methods

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II MAIN CONTENT

2.1 Vietnam’s rice exporting overview

The break-up of the Soviet Union and the fall of communism in the Central andEastern Europe bloc in the 1980s had negative consequences for other communistcountries in South Eastern Asia including Vietnam The country was faced with thediplemma when the Western countries did not open up their economic relationship withVietnam but followed the embargo policy of the United States of America Theshortcomings of the centrally planned and closed economy pushed Vietnam to the brink ofbankruptcy The country was also facing a major economic crisis in 1986 when the highestrate of hyperinflation reached 775% and there was still three-digit inflation for a furthertwo years

For ten years following the country's independence in 1975 until the economicreforms in 1986, Vietnam's international trade relations were mainly confined to thecountries of Socialist Republic bloc and covered some capitalist countries including Japan,France, Sweden and India Meanwhile, export products were mainly manufactured fromvarious natural resources such as coal, chromium, cement and some agricultural products.Foreign trade payment was made in Ruble, which was then converted into US dollar In

1985, the country's export trade with the Socialist Republic countries bloc earned 425.8million Rubles and 272.7 million Rubles were earned through trade with somecapitalist countries

The year 1986 when the leaders of Vietnam's VCP launched a series of economicrenovations including the organizational and personnel structure, administrative system,economic and political system is considered as a turning point of the Vietnameseeconomy Specifically, these fundamental changes applied to the country's economyconstitute a transition from a centrally planned economy to a socialist-oriented marketeconomy The opened position of the VCP on the country's economy is shown by the

Government's acceptance of a multi-sector economy including the state-owned sector,collective sector, domestic private-capitalist sector, foreign-owned sector Following theVCP guideline of 1986 whereby Vietnam was to aim to be on friendly term with thecountries of the world, since then it has started to integrate into the world economy.

Figure 2 Exports of rice from Myanmar, Thailand and Vietnam (1961 – 2011)

Source : Food and Agriculture Organization of the United State

Some economic indicators such as GDP, trade revenue, the FDI attraction indexconfirm how much Vietnam's economy has been transformed since 1986 From 1986 to

2012, the contribution of exports in GDP rose dramatically peaking at 73.5% in 2012 Inparticular, export revenue in 2012 reached 114.5 billion USD, which corresponds to 145times the country's export revenue in 1986 Moreover, the number of Vietnam's importingpartners also rose annually from 33 in 1986 to a peak of 220 in 2002

Figure 3 Evolution of Vietnamese trade and its country partners, 1986-2012

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Imports (real million USD) Number of importing country partner

Exports (real million USD)

Balance (real million USD)

250 200 150 100 50 0

Source: Export, Import and number of destination markets data for 1986-2012 GSO

2.2 Vietnam’s rice production and export performance

Vietnamese export structure has been dramatically transformed and demonstrates

a deeper integration of Vietnam into the world economy Most countries in the worldfinds the process of globalization and economic integration to be an importantopportunity to develop its production, trade network far beyond its own borders and inthe end the national economy

According to Hanh V T (2015), Vietnam, almost 30 years following Doi Moi,has made outstanding progress in trade with a very impressive gain in export revenue

of 114.5 billion USD (at 2012 value) Especially, the number of Vietnam' tradingpartners reached 220 countries in 2009 starting from 33 partner countries in 1986marking a large step towards integration Trade liberalization, at the same time, alsoencourages multilateral and bilateral trade agreements between Vietnam and othermajor economic associations such as, ASEAN, EU and WTO as well as with singlecountry

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 0

5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

7902.5

7816.2 7830.6

Total Production (Thous Tons) Total Planted area (Thous Ha)

Figure 4 Total planted paddy area from 2005 to 2015 Source : General Statistics office of Vietnam

Export rate is related to how much the product can be produced and consumed

by the people in one country As one of the top rice producing countries, Vietnam’stotal paddy field area experience a little bit fluctuation every year Figure 4 shows howthe fluctuation happened, but the trend itself is increasing In 2005, total planted areawas 7,329.2 thousands Ha while ten years later in 2015, the area became around

7,830.5 thousand Ha At the same time with the fluctuation of total land, the riceproduction is fluctuating too as it is showed by blue line in Figure 4 In 2005, totalproduction of rice was 35,832.9 thousands ton, while in 2015 it became almost 10times more in term of quantities, around 45,105.5 thousands ton

Meanwhile, in the export side, according to data appeared in Figure 5, from 2010till 2016, quantity of Vietnam’s rice export has a trend that leaning toward declining.The decrease not only in term quantity, but also the value of the export itself Thisphenomenon can be happened caused by various factors and purpose One of thefactors is according to sggpnews.org.vn citing to Ministry of Industry and Trade inOctober 2017, Vietnam would gradually reduce rice export volume and increase thequality This word actually perceives the low expextations of Vietnam’s rice export in

2016 (as it can be seen in Figure 3), although in fact, the Vietnam’s rice export took apositive turn in the end of 2017 with export volume around 5,9 to 6 million tons

500 1000 1500 2000 2500 3000 3500 4000

Value (Million USD Quantity (1000 tons)

Figure 5 Total value and quantity of Vietnam’s rice export from 2010 to 2016

Source : General Statistics office of Vietnam

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In 2016, majority rice export of Vietnam were white rice 10%-25% broken rate.The white rate accounted around 65% from the total export volume (Figure 6) Therank was followed by fragrant rice, rice 100% broken and other Thang (2017) saidactually the volume of broken rice has decreased significantly compared to whathappened in 2015 Mostly rice 100% broken was exported to China market and theincreasing in good quality rice marked an export raising in stricter market compared toprevious, such as USA, Japan and EU

The top five rice exporters, Thailand, Vietnam, India, Pakistan, and the U.S.,account for 85% of global net trade Despite current uncertainties regarding the impact

of Thailand’s pledging scheme and other rice policies into the future, the country withits production resources and strong focus on quality and branding is expected toremain the top global rice exporter over the baseline period Slower rice export growth

is expected for Vietnam and the U.S due to area limitations, and irrigation constraints

in the case of the U.S India will surpass Vietnam and replace the latter as the secondtop rice exporter over the same period Cambodia and Myanmar are projected toincrease rice exports steadily as production continues to exceed consumption; and it isinteresting to note that the rice export volumes of both countries are projected to catch

up with the declining U.S export levels by the end of the baseline period, at around2.1 million metric tons (mmt) Global net rice exports are projected to grow by 9.3mmt over the baseline period Aggregated net exports of India, Vietnam, Myanmar,and Cambodia will grow by 9.9 mmt while those of Thailand and the U.S willcontract by 1.7 mmt Figure 7 shows the changes in world export shares of major

White rice (10-25% broken); 65 Fragrant rice; 22

Rice (100% broken); 5

Other; 8

Figure 6 Export rice type in 2016 Source : General Department of Customs in Thang (2017)

exporting countries, indicating that Thailand’s share increases from 24% to 35%; U.S.’share increases from 6% to 10%; while India’s share contracts from 22% to 10%.

Figure 7 World Rice Net Export Share Source : Wailes and Chavez (2012)

Foreign exchange rate is an important factor affecting prices in global rice tradebecause international rice prices are quoted in US dollars Under normal condition, ifthe local currency of a rice exporter is appreciating relative to the US dollar, its riceexport price (in US dollars) will increase which in turn will weaken itscompetitiveness in the global rice market On the other hand, if an importing country’slocal currency is appreciating relative to the US dollar, its rice import price (in USdollars) decreases which puts less burden on its local economy The reverse is true forboth cases Figure8 show the exchange rate indices for selected major rice exporterssuch as Vietnam, Thailand and India Since the index is based on US$ per LocalCurrency Unit, an upward line means the local currency is appreciating relative to the

US dollar and a downward line means the opposite Figure 8 also indicates thatVietnam’s local currency is expected to depreciate over the baseline thus improving itsexport competitiveness in the global rice market relative to Thailand and India

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