Dissertation summary: Export development of some key agricultural products in the industrialization and modernization of Vietnam

Objectives of research: To clarify the scientific base (both theoretically and practically) for recommended solutions to development of export of some key agricultural products of Vietnam in the industrialization and modernization until 2020 and with a vision to 2030.

TRAINING AND TRADE

INSTITUTE FOR TRADE

NGUYEN THI CHI

EXPORT DEVELOPMENT OF SOME KEY AGRICULTURAL PRODUCTS IN THE

INDUSTRIALIZATION AND MODERNIZATION

OF VIETNAM

Major: Commercial Code: 62.34.01.21

SUMMARY OF PhD THESIS IN ECONOMICS

Hanoi – 2015

INSTITUTE FOR TRADE – MINISTRY OF INDUSTRY AND TRADE

Scientific Supervisor:

1 Associate Professor Dr Nguyen Van Lich

Institute for Trade

2 Associate Professor Dr Hoang Van Hoan

The thesis shall be defended before the institute-level Thesis Assessment

Committee at the Institute for Trade – Ministry of Industry and Trade

Address: 46 Ngo Quyen - Hanoi

At hour date month year 201

The thesis can be found for further study at:

1 Hanoi National Library

2 Library of Institute for Trade

INTRODUCTION

1 Rationale

For 30 years of renovation, Vietnam’s agriculture has undergone remarkable improvements; from a country importing food in the 1980s, Vietnam has developed into one of the world’s leading countries in exporting some key agricultural products Thanks to products diversification policy, agricultural production has made outstanding steps forward, creating

a large quantity of agricultural products, and integrating in the international market Along with the objective of successful implementation of the country’s industrialization and modernization strategies, Vietnam has been accelerating agricultural development towards large-scale production and application of sciedntific and technological advancements to production in order to improve the quality and added value of agricultural products However, Vietnam’s agricultural exports have faced such challenges

as fiercer and fiercer pressure for competition due to lower competitiveness than the world in various aspects including production capacity, processing industry, quality, price, etc., which leads to the fact that most exports are raw products, low added value, little content of science and technology, and too much difficulty in overcoming technical barriers of developed countries, etc Our main exports are almost unknown in the international market Meanwhile, agricultural development has been a great policy of the Party and Government of Vietnam, clearly stated in the National Party Congress Documents and the Government’s Resolutions for the objectives

of modernizing agriculture and rural areas, contributing to the implementation of industrialization and modernization strategies in Vietnam, and contributing to the fulfillment of export strategy targets and socio-economic development strategy until 2020 This is also the reason for

the author’s choosing the subject “Export development of some key

agricultural products in the industrialization and modernization of Vietnam’ for this doctoral thesis

2 Objectives and tasks of research

Objectives of research: To clarify the scientific base (both

theoretically and practically) for recommended solutions to development of export of some key agricultural products of Vietnam in the industrialization and modernization until 2020 and with a vision to 2030

Tasks of research:

To fulfill the objectives of research, the thesis focuses on the following tasks:

First, clarifying theoretical issues regarding export development of

main agricultural products in the industrialization and modernization;

Second, studying experience of some countries in export

development of main agricultural products and gaining lessons to be applied

in Vietnam

Third, analyzing and evaluating the export development of some key

agricultural products in Vietnam in recent years; and evaluating achievements, shortcomings, and their causes

Fourth, studying and analyzing the background information and

prospect for exporting Vietnam’s main agricultural products until 2020 as a basis for proposing orientation and solutions at both macro and micro level for export development of Vietnam’s main agricultural products until 2020 and with a vision to 2030

3 Subjects and scope of research

Subjects of research: The thesis studies the theory and practice

regarding export development of Vietnam’s main agricultural products in the industrialization and modernization

Scope of research: The thesis focuses on researching into some

theories of export development of main agricultural products in the industrialization and modernization; analyzing and evaluating the current situation regarding export development of some key agricultural products (mostly rice, coffee, rubber, and aquatic products) of Vietnam; recommending some solutions to export development of Vietnam’s main agricultural products in the industrialization and modernization until 2020 and with a vision to 2030 Time: Analyzing the current situation regarding export development of some key agricultural products for the period 2003 – 2013 and recommending solutions for the period until 2020 and with a vision to 2030

4 Methodology

General methodology: The thesis is based on the methodology of the

Marxism–Leninism in terms of dialectical materialism and historical materialism in combination with the Party’s and the State’s economic development orientation and policy

Specialist methodology: Studying secondary documents; collecting

and comparing data; consulting experts and enterprises; conducting sociological survey, consolidating, analyzing, and evaluating survey results

5 New contributions of the thesis

- The thesis has clearly systematized, analyzed, and interpreted the theoretical background of export development of main agricultural products

in the industrialization and modernization In particular, based on the theoretical background, the thesis has identified basic contents regarding export development of main agricultural products in the industrialization and modernization as a basis for establishing a theoretical framework on export development of main agricultural products in the industrialization and modernization

- By means of systems of documents and actual survey data, and analyzing tools such as Export Specialization Index (ES), Trade Intensity Index (TI), etc The thesis has pointed out market prospects, the trend of trade flows shifts, and the possibility to develop export of some of Vietnam’s main agricultural products up to now This shows that, export development of Vietnam’s main agricultural products is highly potential This is the basis for orienting policy on export development of some of Vietnam’s main agricultural products in the coming years In addition, the Thesis has also analyzed situation of conditions regarding human resources, commercial infrastructure and conditions on mechanisms and policies, application of technologies to production and establishment of links in development of exporting a number of key agricultural products Accordingly, the Thesis has also identified shortcomings and clearly interpreted their causes in the export development of such products

- The thesis has consolidated and forecast the prospect for exporting some of Vietnam’s main agricultural products until 2020 On that basis, the thesis provides the orientation for export development of some key agricultural products in the new context of industrialization and modernization, and recommends specific solutions to developing export of main agricultural products until 2020

6 Organization of the thesis

Apart from the Introduction, Overview of Research Works, Conclusion, List of References, and Appendix, the body of the thesis is divided into three following Chapters:

Chapter 1: Theoretical background of export development of main

agricultural products in the industrialization and modernization

Chapter 2: Current situation in export development of some of

Vietnam’s main agricultural products over 2003-2014

Chapter 3: Recommended solutions to export development of

some of Vietnam’s main agricultural products in the industrialization and modernization until 2020

OVERVIEW OF RESEARCH WORKS

In the intensive globalization of the world’s economy and the rapid development of science and technology, competition among the world’s agricultural products is becoming tougher and tougher, and export development of main agricultural products has received great attention and studied both in and out of the country Export development of main agricultural products in the industrialization and modernization does not merely refer to the development in export scale and turnover, but also requires continuous improvement of export quality through application of scientific and technological advancements to production and improvement

of added values of the value chain of agricultural exports

However, to my knowledge, there has so far been no systematic and comprehensive research work on export development of Vietnam’s main agricultural products in the industrialization and modernization

RESEARCH CONTENTS AND RESULTS

CHAPTER 1 THEORETICAL BACKGROUND OF EXPORT DEVELOPMENT

OF MAIN AGRICULTURAL PRODUCTS IN THE INDUSTRALIZATION

AND MODERNIZATION

1.1 GENERAL ISSUES OF INDUSTRIALIZATION, MODERNIZATION, AND EXPORT-ORIENTED INDUSTRIALIZATION

1.1.1 Definition and contents of industrialization and modernization

1.1.1.1 Definition of industrialization and modernization

Industrialization is the process of changing the development modality

of one’s economy The economic development modality consists of two facets (two aspects): infrastructure (including technical capacity), and operational mechanism

1.1.1.2 Contents of industrialization

(1) Industrialization is the process in which industry is separated

from agriculture and transforms itself into large-scale industry (2) Industrialization causes change to technical background of social manufacturing (3) Industrialization enhances capital accumulation and

Industrialization is associated with the development of the system of factories and enterprises in the market economy (5) Industrialization is associated with agricultural development and urbanization

1.1.2 Export-oriented industrialization and modernization

Export-oriented industrialization is aimed at: (1) Promoting comparative advantages in international labor division; (2) Opening the market to attract direct investment and external capital and technical support

in order to create competition and boost export; (3) Making the most of resources to boost export

Implementation of export-oriented industrialization normally comes

in two phases Phase I: Achieving high growth rate due to utilization of plentiful labor for low costs and medium-level techniques in exports production Cheap labor is a comparative advantage In Phase II, high growth rates are still maintained due to utilization of large capital and high-

level techniques for export of industrial goods Exports in this Phase require application of advanced technology

1.1.3 New characteristics of industrialization and modernization

The market economy following the trend of integration and globalization helps facilitate industrialization based on promotion of comparative advantages and intensive participation in the international labor division Industrialization should be based on cutting-edge science and

Industrialization and modernization should contribute to strengthening internal capacity of the economy and external technological acculturation

1.2 EXPORT DEVELOPMENT OF MAIN AGRICULTURAL PRODUCTS IN THE INDUSTRIALIZATION AND MODERNIZATION 1.2.1 Overview of main agricultural products

1.2.1.1 Definition of agricultural products

a Definition of agricultural products

According to the economic structure of Vietnam, agricultural products are often understood in a broad sense, including products from agriculture (crops production, livestock breeding, fishery, forestry, and salt industry)

b Definition of main agricultural products

Main agricultural products are locally produced agricultural products which are more economically productive than other agricultural products, which have a broad, stable, and permanent market for consumption (for a relatively long period of time), which are influential in other products, and

of which export value accounts for a large proportion in the total export turnover of a country

1.2.1.2 Primary characteristics of main agricultural products

(1) The value chain of the agricultural products is not always continuous and often changes quickly (2) Affected by weather, epidemics, and food safety (3) Inconsistent in quality (4) Characteristics in product processing and preservation (5) Value composition of agricultural products ( 6) Characteristics of the market

of agricultural exports (7) Lack of compatibility in information of quality of agricultural products provided to consumers (8) Protection of agricultural products within the country

1.2.2 Contents of export development of main agricultural products

in the industrialization and modernization

1.2.2.1 Definition of export development of main agricultural products in the industrialization and modernization

In the industrialization and modernization of Vietnam until 2020, it is advisable to pay attention to improvement of growth quality Therefore, for main agricultural products, attention should be paid to qualitative transformation apart from quantitative increase On that basis, it can be understood that export development of main agricultural products in the industrialization and modernization includes both extensive and intensive development

1.2.2.2 Extensive export development of agricultural products

Referring to the concentration of resources in expanding export scale, reflected through improvement in quantity and export turnover; expanding export scale includes market development, customer development, and product development

1.2.2.3 Intensive export development of agricultural products:

Referring to the application of science and technology to production

in order to create qualitative change in agricultural exports, reflected through improvement of quality of main agricultural products, change of export modalities, transformation of exports structure, and improvement of resources utilization capacity in order to create stable development and greater added values as well as to ensure harmonized implementation of environmental protection and social welfare

1.2.3 Evaluation targets for export development of main agricultural products

1.2.3.1 Evaluation targets for extensive export development of main agricultural products

(1) Export growth rate (2) Market diversification (3) Product line diversification

1.2.3.2 Evaluation targets for intensive export development of main agricultural products

(1) Revealed Comparative Advantage Index (RCA) (2) Export Index (Rex) (3) Export Specialization Index (ES) (4) Trade Intensity Index

(TI) (5) International Specialization Index (LI) (6) Environmentally safe and friendly

1.2.4 Factors affecting export development of main agricultural products in the industrialization and modernization

1.2.4.1 Product quality

The quality of agricultural products as a factor that boosts export development has to comply with normal standards and ISO standards, and

be certified and awarded ISO certificates by international organizations

1.2.4.2 Time of appearance in international markets

The timely appearance in the market upon request by customers brings even greater added values to exporters than reduction of production and processing costs does

1.2.4.5 Supporting policy

The Government’s macro policy and impacts are the basis for our production and export of agricultural products to take firm steps in the future in the international market

1.3 EXPERIENCE OF SOME COUNTRIES IN EXPORT DEVELOPMENT OF MAIN AGRICULTURAL PRODUCTS IN THE INDUSTRIALIZATION AND MODERNIZATION

1.3.1 Thailand’s experience in export development of rice

Thailand’s experience in improving export effectiveness and joining the global rice value chain includes: (1) Determining its brand through quality of exported rice, (2) Providing supportive services to entities involved in the rice value chain, (3) Improving added values of exported rice, and (4) diversifying exported rice products

1.3.2 China’s experience

(1) Paying attention to promoting strengths of each locality and increasing export of main agricultural products produced by means of new

techniques (2) Attracting overseas investment to develop production and export of main agricultural products (3) Making breakthroughs in policy on agricultural and rural development in China, for example, quickly reducing taxes to attract investment in agriculture, developing hi-tech industrial zones, applying cutting-edge technologies, and, most recently, applying lessons from the ‘Three Rural Issues’ Policy in the new rural development with the ‘two open, one adjusted’ orientation The new rural policy includes encouragement

of agricultural production and improvement of farmers’ rights

1.3.3 Brazil’s experience in export development of coffee

(1) Enhancing the Government’s roles of regulation and support in export development of coffee (2) Revising coffee production mechanism in line with market demand and developing coffee products (3) Paying attention to improving coffee quality and types of specialties from production stages (4) Developing a stable local consumption market as a basis for expanding the market overseas

1.3.4 Malaysia’s experience in export development of natural rubber

(1) The Government’s role of regulation and support in export development of rubber (2) Accelerating production and export development

of rubber products with high added value (3) Strengthening competitiveness

of rubber products in the world’s market through development of implementation research activities

1.3.5 Lessons learnt for Vietnam

(1) Enhancing development and management of agricultural planning; and supporting agricultural and rural development in order to create the basis for agricultural products for export development (2) Transforming agricultural structure towards improvement of added values in the agricultural output value chain (3) Effectively supporting farmers without violating WTO commitments (3) Strengthening trade promotion and brand development (5) Strengthening the State’s role of macro regulation in relevant aspects (6) Developing a strategy on export development of some key agricultural products at both national and enterprise level (7) Continuously renovating marketing networks and developing production – consumption – export channels

CHAPTER 2 CURRENT SITUATION IN EXPORT DEVELOPMENT

OF SOME OF VIETNAM’S MAIN AGRICULTURAL

PRODUCTS OVER 2003-2014

2.1 CURRENT SITUATION IN PRODUCTION AND PROCESSING OF SOME OF VIETNAM’S MAIN AGRICULTURAL PRODUCTS

2.1.1 Identifying Vietnam’s main agricultural products

Selecting Vietnam’s main agricultural products is based on a certain number of criteria, for example, to what extent the products contribute to the national GDP, the output products are mostly for export, the exported products have developed stably for a long time, the products are competitive

or in other words, can help promote Vietnam’s advantages in terms of national and socio-economic conditions

Consultations have been conducted with some economic experts and surveys directly performed to enterprises in industry and trade sectors that are able to grow in combination with analysis of statistical data for a relatively long period of time Results show that, 4 groups of agricultural products are able to grow most impressively, including:

1 Rice; 2 Rubber; 3 Coffee; and 4 Aquatic products

2.1.2 Production and processing of some of Vietnam’s main agricultural products

2.1.2.1 Rice

Despite the inconsiderable increase in the rice growing area over 2003-2013, due to application of scientific and technological advancements, especially to rice varieties, and significant investment in irrigation, the rice output of Vietnam is the largest among South-East Asian countries, 17% higher than Asia’s average output, but 75-77% lower than those of China, South Korea, and Japan

2.1.2.2 Rubber

rubber exploitation with a proportion of approximately 7.6%, equivalent to

accounting a market share of approximately 10.3%, equivalent to 1.02

million tons Among key zones in the country, Tay Ninh is the one to reach the highest output, at 2.1 tons/ha, followed by Binh Phuoc (1.98 tons/ha), and Binh Duong (1.85 tons/ha)

2.1.2.3 Coffee

The coffee planting area has mildly decreased by 0.24%/year The average growth rate of coffee output in Vietnam has reached 2.5%/year The coffee output has continuously increased; it reached 1,289.5 thousand tons

in 2013, and has increased by 3.2%/year on average, making Vietnam the

2.1.2.4 Aquatic products

The structure for gross output of fishery has shifted towards increasing the gross output of aquaculture and decreasing the gross output of aquatic exploitation The total fishery output has increased 6.33%/year on average

Fishery processing: is one of remarkable activities in processing of agricultural products in Vietnam More than 77% of processing facilities in Vietnam are certified to meet food safety and hygiene standards and their output account for around 70% of the total output of the processing industry

2.2 CURRENT SITUATION IN EXPORT DEVELOPMENT OF SOME

OF VIETNAM’S MAIN AGRICULTURAL PRODUCTS

In the past years, export of Vietnam’s main agricultural products has made considerable contributions to the country’s renovation, acted as one of major driving forces of economic growth, and helped stabilized political and social situations

2.2.1 Current situation in export development of rice

In the period 2003-2013, the proportion of the rice export turnover in the total export turnover of Vietnam was 4.25%, which was a considerable proportion The rice export value contributed a substantial part in the GDP,

at 2.65% on average The average growth rate reached 13.6%

In recent years, Vietnam has boosted export of high-class rice, which has high export price, to a proportion of more than 46% of the total export turnover while export of low-class rice accounts for only 11% Vietnam’s exported rice has a high comparative advantage thanks to its favorable natural conditions and cheap labor However, in the current context, this advantage has had its value lessened as other countries have gained an