VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES NGUYEN THI THUY LINKAGE BETWEEN FIRMS AND FARMERS IN FARMING DEVELOPMENT IN THAI BINH PROVINCE IN INTERNATIONAL I
Trang 1VIETNAM ACADEMY OF SOCIAL SCIENCES
GRADUATE ACADEMY OF SOCIAL SCIENCES
NGUYEN THI THUY
LINKAGE BETWEEN FIRMS AND FARMERS IN FARMING DEVELOPMENT IN THAI BINH PROVINCE IN INTERNATIONAL INTEGRATION CONTEXT
Major: Economic development
Code: 9 31 01 05
SUMMARY OF ECONOMIC DOCTORAL THESIS
Ha Noi – 2019
Trang 2Thesis is completed at:
Graduate Academy of Social Sciences
Supervisor:
1 Dr Tran Ngoc Ngoan
2 Prof Dr Nguyen Van Song
Master Reviewer 1:……… Master Reviewer 2:……… Master Reviewer 3:………
The thesis will be denfended at the Doctoral dissertation council in the Graduate Academy of Social Sciences at ….day… month… year
2019
Thesis can be found at:
- Library Graduate Academy of Social Sciences
- National Library, Hanoi, Vietnam
Trang 3INTRODUCTION
1 The urgency of the subject
Vietnam is gifted with various advantages in agricultural production, and its agricultural products are of high economic value With the rural population
of "60.8 million, accounting for 64.9% of the total population" (GSO, 2017) Our country has a variety of export items to countries in the region and around the world such as rice, coffee, pepper, cashew and tea, etc In 2018, GDP increased by 7.08%, specifically, agriculture, forestry and fishery sectors
reached a significant growth with a rise of 3.67% (GSO, 2018)
Vietnam is a member of the ASEAN Economic Community (AEC), successfully negotiates the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and joins AFTA, etc By taking part in the international integration these, Vietnam has been given with a great number of new opportunities: increasing volume of goods consumption, facilitating attraction of foreign direct and indirect investment, promoting better economic development to efficiently exploiting its economic potentials, strengthening the trend of global integration and enhancing socio-economic life
Thai Binh has a special geographical position (the only plain province that isn't surrounded by hills and mountains) Especially, with its main strengths in the farming sector, the average food output is over "1 million tons / year, rice productivity in 2017 reached over 59.4 quintals / ha / year" (GSO, 2017) , Thai Binh province particularly pays big attention to linkage models in rice production and consumption as commodity for residents Specifically, Thai Binh keeps maintaining a pilot model based on the linkage of enterprise- business household-farmer and the linkage of enterprise-cooperative-farmer, in which firms play a pivotal role
However, farming development in Thai Binh is still monoculture and in fragmented type, facing various difficulties including “commodity production still at a low level, fragmented and small-scale production status, lack of capital, traditional farming practices, lack of production experience, failure of forming a stable and sustainable economic development model, especially backward processing and storage.” Therefore, in order to overcome limitations, challenges and obstacles to comprehensively develop the agricultural economy as well as to the farming sector with the orientation of international integration, it is necessary to establish and strengthen such linkages It has to be done to achieve large value of goods, high-quality goods with brands to meet demands in international integration, participating in the
Trang 4regional and global development network Therefore, promoting linkage in farming development proves to be necessary in the current period in our country as well as in Thai Binh province
From the above considerations, I have chosen the topic "linkage between firms and farmers in farming development in Thai Binh Province in the context
of international integration" as my research topic
2 Objectives of the thesis topic
a General objective
The general objective of the thesis is to find certain solutions and proposals to promote the linkage between firms and farmers in farming development in Thai Binh Province in the context of international integration
b Specific objective
Firstly: systematizing and clarifying theoretical and practical basis regarding the linkage between firms and farmers in the context of international integration Secondly: Assessing the situation and factors affecting the linkage between firms and farming households in farming development in Thai Binh Province in the context of international integration
Thirdly: proposing certain solutions to promote the linkage between firms and farmers in farming development in Thai Binh Province in the context of international integration
3 Object and scope of the study
- Research subject of the thesis: Theoretical, practical issues and current situation of the linkage between firms and farmers in farming development in the context of international integration
- Research scope:
+ Scope of location: districts and communes engaged in agricultural production (mainly farming) in Thai Binh province
+ Scope of time: Within the research scope, the PhD candidate only focuses
on solving theoretical and practical issues to propose solutions to promote the linkage between firms and farmers in farming development in Thai Binh Province in the period of 2010-2018 and development orientation of farming sector in Thai Binh province until 2025
4 Research Methodology
Approach: The thesis uses certain approaches: system approach, policy
approach, history approach, sustainable development approach to study the linkage between firms and farmers in farming development in Thai Binh Province in the context of international integration
Trang 5Research method:: To solve research tasks, the thesis uses a number of
specific methods including: (1) Qualitative research method, quantitative research method; (2) method of descriptive statistics and (3) General method
of economic analysis
5 New scientific contributions of the thesis
(1) What is the actual situation of the linkage between firms and farmers in farming development in Thai Binh Province ? What is the mechanism for linkage implementation (2) What are the benefits of the participants in the linkage process? (3) In the context of “international integration” today, what role does the linkage play? 4) What are main methods of linkage between firms and farmers
in the farming sector in Thai Binh Province? (5) What factors can influence participation in the linkage between firms and farmers in the farming industry? How much do those factors influence? (6) What measures need to be taken to strengthen the linkage between firms and farmers in the farming sector in Thai Binh Province in the coming time?
6 Theoretical and practical significance of the thesis
- The thesis analyzes and assesses inadequacies and factors affecting the linkage between firms and farmers in farming development The thesis also presents points of view, objective certainty, role and develops criteria for finding evaluation
6.2 Practical significance
- The thesis uses qualitative research and quantitative survey findings to analyze and make assessments on the situation of linkage between firms and farmers in farming development in Thai Binh Province in the context of integration
- Based on those evaluation criteria as well as findings on causes of limitations and shortcomings upon implementing the linkage between firms and farmers in farming development in Thai Binh Province in the context of international integration
- Based on theoretical and practical analysis, the thesis proposes certain solutions to promote linkage between firms and farmers in farming
Trang 6development to meet demands upon international integration of the agriculture throughout the country and in Thai Binh province in the coming time
- The thesis is also a significant information channel for policy makers, managers, departments and divisions in Thai Binh province, advisory agencies, socio-economic research organizations and for personal reference
7 Structure of the thesis
In addition to the preface, the thesis's conclusion consists of 4 chapters:
Chapter 1: Literature review
Chapter 2: Theoretical and practical bases on linkages, linkages between
firms and farmers in international integration
Chapter 3: Current Situation of Firm And Farmer Linkage, Factors Affecting
Firm And Farmer Linkage In Development OfThai Binh Farming Industry In International Intergration Context
Chapter 4: Some solutions to enhance effective linkages between firms
and farmers in farming development in Thai Binh province in integration context
CHAPTER 1: LITERATURE REVIEW
1.1 Foreign situation of research:
a A Linkage and cooperation between firms and farmers (contract farming)
Western economists assume that “economic linkage is an objective and inevitable phenomenon and is a form of market administration under capitalism that minimizes transaction costs The theory on transaction costs of firms associated with the theory on contractual relationship is part of the newly established theory on new institutional economics in the US ”, mentioned by Coase (1960), Demsetz (1964) , William (1985), and Kleinet al (1978) argue that: "In a market economy, institutional improvements will lead to cost reduction"
b Vertical land horizontal linkages
“Vertical linkage is based primarily on transactional relationships but also includes voluntary assistance or transfer of resources and technology to local partners” (Pack and Saggi, 1997; Saggi, 1999) “Horizontal linkage relates to cooperative arrangements between foreign and domestic firms in the form of joint ventures and networking between firms” (Pack and Saggi, 1999; Saggi, 2002; Giroud and Scott- Kennel, 2006)
c Context
Trang 7International economic integration is an inevitable development trend of the global economy in the current period Especially, it is significantly impacted by the 4.0 industrial revolution
The phrase "hội nhập quốc tế”" in Vietnamese rooted from foreign languages ( "international integration" in English and "intégration internationale" in French) This concept is mainly used in the fields of international politics and economics
1.2 Domestic situation of research:
a Research works related to production linkage through contract
Economic linkage through contract is the most basic form “Since the Prime Minister's Decision No 80/2002 / QD-TTg dated June 24, 2002, a number of agricultural products such as rice, coffee, sugarcane, sugar, seafood and pork have been sold by sales contracts"(Nguyen Thi Quynh Hoa, 2005), or" a contract between sugar-cane manufacter and sugar-cane company"(Ngo Thi Thuy, 2004) However, these topics have not yet shown specific findings
of the linkage results achieved by farm households linked to firms “The linkage between farm households and state-owned firms is the strength to facilitate the economic development in farming At the same time, a favorable economic environment will be created to develop the market-oriented commodity economy However, this research has not shown the real benefits
of the parties involved in the linkage yet ”(Tran Van Hieu, 2005)
b Research works related to linkage forms
Linkage means in produce consumption of farm households is construed
as “the form existing and developed of cooperative relationships between
farm households and other agricultural production, processing and trading entities in order to save time, costs and achieve greater efficiency in agricultural production and business, enhance competitiveness, share capabilities and open new agricultural markets in certain conditions" (Ho
Que Hau, 2012)
c Research works related to economic linkage
“Economic linkage in the market economy and economic integration is the initiative in awareness and implementation of objective economic linkages among economic entities in the social economy in order to implement the relation of labor division and cooperation to achieve common socio-economic benefits”(Ho Que Hau, 2012) Therefore, "economic linkage is an objective category that reflects the coordination relations between production and business entities in order to save time, costs and achieve greater efficiency in
Trang 8production and trading of agricultural products, enhance competitiveness, share capabilities and open new markets ”(Vu Duc Hanh, 2015)
e Context
According to Pham Quoc Tru (2011): “International integration is
construed as the process of countries carrying out activities to strengthen their linkage with each other based on their com mon benefits, goals, values and sources and power (decision-making authority) and compliance with general rules within the framework of international institutions or organizations ” He said: “The subject of
international integration is all of the nations; the main subjects of international relations have full competence and capacity to negotiate, sign and implement international commitments Besides those main subjects, the other entities form a combined force to participate in the process of international integration ”
Nguyen Van Song (2009): “Joining integration, especially after entering the WTO, we must adapt to direct changes in terms of prices, and types of crisis from markets and world situations
Chapter 2: THEORETICAL AND PRACTICAL BASES ON LINKAGES, LINKAGES BETWEEN firms AND FARMERS IN
INTERNATIONAL INTEGRATION 2.1 Agriculture and linkage issues in agricultural development
2.1.1 Some concepts
2.1.1.1 Concept of farm household
Frank Ellis, the University of Cambridge (1988), defined: “Farm households
are those working in agriculture, making their own livelihoods on their lands, mainly using their own family labor in production, usually belonging to the larger economic system, but being primarily characterized by local participation of markets and operational tendency with a high degree of imperfection.”
2.1.1.3 Concept of farming industry
Farming is an important industry in agriculture Farming industry can provide food for humans, feed for cattle and poultry and raw materials for industry, but also its products are also used for export
2.1.1.4 Concept of linkages and economic linkages
The link originates from "Intergration" which economically means "unity,
coordination or merger of many parts into one whole" The old-era authors called the same as"Intergration", but as "linkage" by the new-era ones (Nguyen
Nhu Y, 1999) According to Be’la Balassa (1961), "Economic linkages are
Trang 9closely understood as the institutional cohesion between economic organizations and economies."
2.1.1.5 Concept of enterprise and farmer linkages
According to Ho Que Hau (2012): The linkages between firms and farmers is a part of economic linkage, in which the parties involved in are firms and farmers who implement certain constraints to stabilize and improve economic efficiency According to Eaton, Charles and Andrew (2001): Contractual agriculture is an agreement between farmers and firms based on the principle of future binding: price, quantity, and term
2.1.2 Content on business and farmer linkage in production and development
2.1.2.1 Regarding forms of agreement
a A Oral contract (Unofficial contract)
An oral contract is a compromise between parties not in writing The parties can discuss, exchange and reach agreement on certain issues by themselves Despite this, oral contracts are also agreed by the parties on
"quantity, quality, price, time and place of delivery" This type of contract is based on the belief and credibility among the contractual parties
According to Le Xuan Sinh (2013): “The linkage between farm households and agribusinesses is mainly done through contract and agreement The legality of this contract is doubtful, the responsibility for contract performance
is loose Most oral contracts between businesses and farm households lack binding terms, just as a memorandum of understanding between the parties They have not been an economic contract yet"
b Contractual linkage (Cooperative linkage between businesses and farmers)
According to Eaton and Shepherd (2001) "Contract farming is an agreement between farmers and processing businesses or firms trading in production and provision of agricultural products based on future delivery agreements in which prices are pre-determined According to Sykuta and Parcell (2003) "Contract farming in agriculture sets out the rules for the allocation of three main elements: benefits, risks and decision-making power"
2.1.2.2 Regarding the linkage expression
a A Vertical linkages
Vertical linkage is a form between entities and economic actors at different levels According to Gulati et al (2007): “Farmers can join a vertical linkage
Trang 10by participating in the value chain, and vice versa being consumers of the output of firms Such linkage is to ensure the quantity and quality of product as well as the harvesting time managed and monitored for the best benefits to the participants ” According to Bijman, Jos and Meike Wollni (2009): "Linkage is
a solution to control food safety" As reported by the World Bank (2007):
“Many organizations perceive that contract farming is one of the main solutions to link farmers and markets at home and abroad, thereby contributing
to poverty reduction.” “Vertical linkage is based primarily on transactional relationships but also includes voluntary assistance or transfer of resources and technology to local partners” (Pack and Saggi, 1997; Saggi, 1999)
b Horizontal linkages
“Horizontal linkage relates to cooperative arrangements between foreign and domestic firms in the form of joint ventures and networking between firms” (Pack and Saggi, 1999; Saggi, 2002; Giroud and Scott- Kennel, 2006) Or "horizontal linkage shows the interaction between foreign and local firms in the production of goods and services in the same production stage" (Unctad, 2001) The authors also "distinguish the linkages and their effects The most important effect is called the spillover effect, arising as a side effect from the actions of foreign firms to the domestic economy ”(Coe and Helpman, 1995; Coe et al, 1997; Giroud and Scott-Kennel, 2006; Dieppe and Mutl, 2013) And the linkage is seen as a direct mechanism for spillover effects to take place In a research by Stockbrige et al (2003): “Cooperation between farmers for production communities have helped them to have better negotiation ability in input purchasing as well as market information accessing” Horizontal linkage can be done in 3 forms with increasing levels: mutual-aid team, cooperative groups and cooperatives
c Mixed linkages
According to Rome Lazzarini, S.G (2008): “It is a linkage included vertical and horizontal linkages This form appears in the process of development and integration when the relationship between households, establishments and production and business firms is a combination of cooperation and competition These units, on the one hand, associate horizontally with each other to form teams, or cooperatives .for the better competition among them, for limiting price squeeze On the other hand, those teams or cooperatives vertically link with processing firms, or are suppliers of products for the next actor in the production and business process.”
Figure 2.1: Relationship between components in a link chain
Trang 11uyển giao
khoa
học
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c tổ chức
CNH,H
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ng thôn
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ị trư
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(Source: Phan Huy Duong, 2006)
2.2 Role of linkage in agricultural development
Regardless of any linkage form, the benefits brought about by them play a great and very diverse role Le Xuan Ba (2003) and Le Dinh Giam (2007) point out in their studies some of the key roles of economic linkage in socio-economic development as follows:
Firstly, “economic linkages help achieve economies of scale Secondly,
"economic linkages reduce costs and resources consumption, increase efficiency and respond quickly to development requirements
Thirdly, economic linkages help adapt quickly to changes in the business
environment
Fourthly, “economic linkages help minimize risks When joining a
linkage, the risk will be allocated to the participating partners, not just focusing on one subject, then the ability to overcome difficulties will be higher
Fifthly, “economic linkages help market subjects quickly access to new
technologies The parties involved can transfer technology to each other, at reasonable costs and in quick time, due to their mutual trust."
Sixthly, "economic linkages create endogenous strength, limit external
negative impacts, and create an effective environment to attract investment"
Seventhly, "Economic linkages increase the specialization division and
general economic development, eliminate unipolar, localized, closed development, expand international cooperation and division and broaden market Economic linkages help firms conquer new markets due to their financial capacity, taking advantage of low-cost advantages (product supply contracts, franchise contracts ) "
Trang 122.2 2.2 Role of and promotional conditions for firm and farmer linkages for farming development
2.2.1 Role of firm and farmer linkages for farming development
2.2.1.1 For farm households
Joining the linkages helps farmers to overcome the disadvantages of scale such as small-scale production, dissatisfaction at the market demand for quantity of agricultural products This is the only way for small farm householders to participate most effectively in the production chain and work cooperatively to form an organization in the market This will contribute to the best favour and lowest level of risk to material purchase and output sales Production by an organization helps farmers take advantage of market opportunities Opportunities to integrate their agricultural products into the world market Because when participating in the linkages, the households must comply with the terms, conditions and production requirements as required by the firms They must be produced in accordance with the process with clean technology and safe chemicals and pesticides
2.2.1.2 For firms
In the context of international integration today, the agricultural sector must apply CNC in production to be competitive, and linkage is a must for agricultural development accordingly In this case firms play a central role
By linking with farmers, firms purchasing agricultural products are able to take initiative in production plans with stable input sources Meanwhile, their costs for intermediaries in the process of purchase or distribution will also be reduced much Linkage helps firms demonstrate the role of household economy leading in the development process
2.2.1.3 For managers
The linkage between firms and farmers in agricultural development in general and farming in particular contributes to promoting the development of collective economy, thereby speeding up the process of specialization in agricultural production and forming a professional farmer community, well implementing the economic and political orientations of the Party and State Hence, each agent in the consumption of agricultural products will be facilitated
in promotion of their advantages, creating high-quality and large-quantity products satisfactory to the market needs, creating specification and cooperation
of each actor in the linkage and also throughout the society
2.2.2 Conditions for forming firm and farmer linkages for farming development
Trang 13Firstly, “there must be a system of legal documents and institutional organizations for the chain."
Secondly, "there must have agents to form the management of all linkages" Thirdly, "such linkage will contribute to increasing the scale"."
Fourthly, "there must be good communication to create awareness in the social community, especially in the producer and consumer community."
Fifthly, "authorities from central to local levels must have consensus on support in and formation of linkages."
2.2.3 Factors affecting the formation of firm and farmer linkages for farming development in integration context
2.2.3.1 Internal factors
a Awareness factor
b Production resource factor
c Motive for linkage
2.2.4.1 Reflective indicators of results of firm and farmer linkages
- Area, productivity and output of crops grown in the area
- Value of farming products in the area
-Quantity of products consumed of farm households in the area
- Selling prices of farming products in the area
2.2.4.2 Reflective indicators of linkage situation and results of firm and farmer linkage in the farming industry
- Percentage of firms and farmers participating in the linkage
- Volume of input supplies and raw materials supported through the linkages
- Volume of products consumed through the linkages
- Product selling price through the linkages
- Number of firms and households violating the linkage content