Summary of doctoral thesis in economics tea value chain of nghe an province

With the above reasons, thesis on "Tea value chains of Nghe An province" was selected and studied with the aim of suggestion overall and focus solutions for developing tea value chain wh

VIETNAM ACADEMY OF SOCIAL SCIENCES

THE INSTITUTE OF SOCIAL SCIENCES

NGUYEN CONG BIEN

TEA VALUE CHAIN OF NGHE AN PROVINCE

SUMMARY OF DOCTORAL THESIS IN ECONOMICS

Hanoi - 2020

The paper is completed at:

VIETNAM ACADEMY OF SOCIAL SCIENCES

Supervisor: 1 Assoc.Prof Dr Nguyen Dinh Long

2 Assoc.Prof Dr Tran Dinh Thao

Reviewer 1: Prof Dr Do Duc Binh

Reviewer 2: Assoc.Prof Dr Ngo Quang Minh

Reviewer 3: Assoc.Prof Dr Nguyen Huu Dat

The thesis is defensed before the Doctoral guidance committee, organised at Vietnam Academy of Social Science

INTRODUCTION

1 Necessity of the research topic

Tea is an economic industry developed in rural midland and mountainous areas of Vietnam and creating a large number of jobs for the agricultural labor force Therefore, tea products have been identified as one

of the main export products of the country and should be strategicly developed as country„s commodity for export, earning foreign currency Nghe An is a province that plays an important role in economic and trade exchanges between the North and the South of Vietnam and with other countries in the region, especially Southeast Asian countries such as Laos and Thailand and China Nghe An is also one of the three key tea-producing regions of Vietnam Tea products from Nghe An have also been approaching closer to domestic and foreign markets [17]

In recent years, Nghe An has invested in the field of hi-tech agricultural development in the western region, which focuses on the implementation of projects on raw material production areas associated with agricultural processing and consumption markets for tea trees in particular and agriculture in general However, Nghe An tea is just the material for major tea manufacturers in the world and has not really created its own brand Tea products consumed are mainly in the form of raw materials or semi-finished products, including exported tea (green tea, black tea), mainly in bags of 30 kg and 50 kg, after which the importer processes refined and packaged with their branded consumption Therefore, the economic value

of the tea industry has not really achieved as per the strategic goals, reducing the economic efficiency of the advantage industry, reducing efficiency in use resources of the province in particular and of the economy

in general

According to the roadmap for the implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), there will be many opportunities for the Vietnamese economy in general and the Nghe An tea industry in particular, especially opportunities to attract investment and boost exports to the world's major economies With these opportunities, Nghe An tea industry will also face many challenges such as: fierce competition in both domestic and foreign markets, requiring agriculture as well as tea industrym to be close linkage, forming a value chain with large scale, good quality, and low cost in order to compete in the world market

With the above reasons, thesis on "Tea value chains of Nghe An province" was selected and studied with the aim of suggestion overall and focus solutions for developing tea value chain which helps Nghe An province improve the value of tea products, take advantage of the province's competitive advantages

2 Aims of research

Setting up scientific and practical bases for the solutions to development tea value chain of Nghe An province, which helps Nghe An province with improving the value of tea products, achieving the province's competitive advantages

3 Object and scope of research

4 Research Methodology

The thesis uses a number of research methods, including:

(1) Qualitative method: Used to overview researches related to the topic

of the thesis, thereby determining the research orientation of the thesis (2) Quantitative research method: Used to analyze the current state of tea value chain of Nghe An province in the period 2015 - 2019 and draw conclusions about the results achieved, limitations and causes of drought processing in the development of tea value chain of the province

(3) The expert method: is used to identify the causes of the limitations in determining tea value chain of Nghe An province and propose solutions to develop tea value chain of the province

(4) Comparative method: is used to propose solutions to the development of tea value chain of the province

(5) Forecast method: is used to report the possibility of tea production development, changes in tea supply and consumption markets on the basis

of natural, socio-economic conditions of Nghe An province and the current status of value chain development in Nghe An tea

5 New scientific contributions of the thesis

- In theory: The thesis has summarized the studies on the value chain of the agricultural sector in general, tea value chain of particular, then researching and completing the theoretical basis of tea value chain The thesis selects and approaches the concept of the value chain according to the production process which includes inputs preparation, organizational activities and uses of resources in production to create value for the tea industry Therefore, solutions to develop tea value chain of Nghe An province will be approached on the direction of policy and institutions and will affect both production, processing and trade on tea retail, in that they will focus on the important and decisive stages to the efficiency of value chain development of tea industry in order to increase the economic value

of the industry and promote the economic development of the province

- In practice: On the basis of analyzing and assessing the current situation of the development of tea value chain of Nghe An province, the thesis has clarified the achieved results, limitations and factors affecting the development of tea value chain, thereby proposing a solutions to develop tea value chain, include: (1) Solutions to improve the efficiency of resource use; (2) Solutions for in-chain link development; (3) Solutions on economic policy; (4) Solutions to create a business environment for businesses The proposed solutions ensure the scientific, synchronous, focus on the impact

of tea production, processing and trade, thus contributing to the development of tea‟s value chain, increasing economic value of tea industry and promote the economic development of Nghe An province

6 The structure of the thesis

Apart from the introduction, conclusion, and references, the thesis is structured into 4 chapters

Chapter 1: Overview of researches related to the thesis topic

Chapter 2: Theoretical and practical basis for tea value chain

Chapter 3: Current status of tea value chain of Nghe An province

Chapter 4: Solutions to develop tea value chain of Nghe An province

CHAPTER 1: OVERVIEW OF RESEARCHES RELATED TO THE

THESIS TOPIC

1.1 Overview of researches on the value chain of the agricultural sector 1.1.1 Overview of researches on the value chain of the agricultural sector from the point of view of Filière

According to this method, the concept of value chain mainly focuses

on the problems of the relationship of production output and services, summarized in the flow diagram of goods and the transition relationship diagram through chain participants [63] The concept of the value chain is understood relatively similar to the concept of the supply chain

The studies of the authors' show that: value chain approaches on filière‟s point of view does not emphasize the importance of linkages to gain value and advantages to compete in the global market The studes only focused on the value chain of a certain industry in a certain area and includes factors such as logicstic, supply, value added creation, distribution and market linkage… Studies have not shown how to analyze and orient the production and business organization of each actor in the chain to be able to propose solutions to improve the endogenous value of each actor in the chain

1.1.2 Overview of agricultural value chain studies from the perspective of approaching competitive advantage

The value chain approach to competitive advantage is developed by Michael Porter, with the view that the value chain is considered as a factor to create and maintain an organization's sustainable competitive advantage in business in the 21st century [53] According to Michael Porter, value chain is the sequence of activities of a company operating in a particular industry that gives the product more value-added than the total value added of activities combined Under this approach, a clear distinction should be made between the main activities, which directly contribute to the added value of the production

of goods and the supporting activities that have an indirect effect on the final value of the product

Applying the approach of M Porter, author Nguyen Van Bo, Dao The Anh (2013) in the research "Solutions to increase value added in the value chain of agricultural products in Vietnam" [2] has given 5 basic solutions to improve value chain include: solutions to the application of technology in breeding, fertilizing, converting farming systems, crop

structure, and technologies in agricultural processing and preservation; market solutions; solutions to building and developing national brands; business support solutions; solutions to support the building of farmer organizations and industry associations Romero, C and Rehman, T (2003)

in the study with the topic "Multiple criteria analysis for agricultural decisions" [56] and Jongen, W.M.F (2000) in the study with the topic

“Food supply chains: from productivity toward quality” [45] analyzed the value chain of the agricultural sector according to the production process and proposed solutions to increase the added value of firms participating in the supply chain in that industry

Thus, the value chain approach from the point of view of M Porter will help enterprises analyze the strong and weak stages in the production process, and at the same time, propose solutions to increase the value created from stage and development of service and auxiliary activities to help the final product have higher value or even higher than the total value brought from all stages in the production process However, this approach cannot be applied to a region or a country with the aim of using resources effectively and developing sustainably for a manufacturing industry which the value chain has many stages and links To this aim, a combination of different methods is required in order to have the most complete and objective assessment of the value chain of the agricultural sector, as a basis for proposing solutions for developing the value chain of our country's agriculture sector today

1.1.3 Overview of research on the value chain of the agricultural sector from the point of view of global value

The authors Gereffi and Korzeniewicz (1994) introduced the concept

of the global commodity chain, which is "a centralized network that unites organizations around a commodity, uniting manufacturing organizations, enterprises, and countries in the world economy "[47], accordingly, each specific stage in the value chain is considered as a chain and they are linked together to form networks

The analysis of the global value chains shows that the production process includes many different stages, which are not only the normal material transformation process, but also include other stages of creating value added, requiring the participant to qualifications such as research and development, marketing and branding… These are stages that create high

added value, high barriers to entry, help businesses avoid competition from outside and ensure a sustainable increase in revenue

The value chain approach under this point of view is the value-added chain of a series of activities aimed at bringing a product from idea to the end consumer There are also some reseachers approaching the value chain concept according to the globalization method, such as Raphael Kaplinsky, Gereffí, Kozeniewicz In 1994, in "Comodity Chain and Global Capitalism", Gereffi và Korzeniewicz introduced the concept of Global commodity chain and considered as a step forward because this is the first time the value chain access on a global scale

The author Nguyen Ke Tuan (2003), when researching on the development of agricultural export production in Vietnam [25], gave development solutions, which emphasized the role of processing industry development and this is considered as the basic way to increase the added value of Vietnamese agricultural products and recommend to limit the

export of raw products, contributing to stabilizing agricultural production

Hoang Hai Anh (2005) in the study "Vietnam agricultural products and the way to build brands" [1] discussed the current situation of Vietnam's agricultural products with the comments: up to 90% of agricultural products force of Vietnam, has been present in more than 80 countries around the world Authors Nguyen Huu Tam (2016), Tran Cong Thang (2015), Ngo Thi Phuong Lien (2019) in their research also agree that: the use of production resources is not reasonable in the transfer Science and technology, and other productive factors such as infrastructure, services, education and training are also limited

Thus, with the studies on global value chains, analyzes are performed relatively sufficiently and diversely for the agricultural sector or for a specific agricultural commodity However, on the analytical objective mainly towards the development of the activities of the actors participating

in the value chain and combining the views of M Porter, the authors analyze the factors influence the value of actors in the value chain and propose solutions to increase the added value of enterprises in the chain A few studies have mentioned the solutions of the government or provincial government agencies that can intervene in the chain to contribute to the development of the global value chains and propose solutions to the development of value chain in the industry Agriculture Although the proposed solutions have contributed to promoting the development of the

value chain, they are still fragmented and not linked to form an overall and effective development strategy of agricultural value chain

1.2 Overview of researches on tea value chain

1.2.1 Overview of researches on tea value chain approached by Filière method

A typical example of this approach is Sheikh Mohammed Rafiul Huquem (2014), with the research on tea value chain of developing countries and related issues, he suggested solutions in the economic and business conditions of developed countries

The author Ngo Thi Huong Giang (2010) in a study with the topic

"Supply chain of Thai Nguyen tea - shortcomings and recommendations" analyzed the tea supply chain in Thai Nguyen province, pointed out shortcomings and suggested solutions to enhance the value of tea products

in Thai Nguyen province through promoting the role of associations, the People's Committee of Thai Nguyen Province in participating in tea value chain, thereby contributing to enhancing the value of tea Thai Nguyen tea products [70]

Up to now, using of the chain method in tea value chain analysis has not met the requirements of developing the tea industry in Vietnam in particular and in the world in general With the economic integration process between countries, it is required that the analysis of tea value chain

is not merely the stages in the supply chain in a region or locality but towards value chain analysis must be associated with international specialization of tea products

1.2.2 Overview of researches on tea value chain approaching the method of competitive advantage

From the point of view of competitive advantage, author Ariyawardana (2003) conducted research on tea producers in Sri Lanka, examining the competitive advantages that are related to the productivity of tea growers [30] The study has shown that the factors that belong to the governance of tea growers affect the productivity of tea cultivation and the value of tea products, thereby proposing solutions on governance to increase added value for tea growers in Sri Lanka

The report of Agrrifood consulting international (2013) shows that Vietnam's tea value chain has two main channels, the first one is tea growers (farmers) and export tea processing enterprises Martin Odoch (2008) suggested a number of solutions to improve the quality of tea leaves

in the Republic of Uganda to supply commercial value chain, which

confirmed the role of tea producing intermediaries, emphasizing the strategy Marketing of the business [71] Charles Kirimi Mbui (2016) studied the effects of strategic governance on increasing added value for tea exports in Kenya [34] Research by Tsalwa S Grace and Theuri Fridah (2016) on factors affecting tea value in tea value chain in Kenya, including: demand and type of market, government policy, strategic decision, labor skills [59]

1.2.3 Overview of researches on tea value chain according to the global value method

Currently, the researches on the global value chains for tea products are done quite a lot by the authors for many purposes In general, the authors agree that tea value chain usually has 4 stages: (1) tea growing (production): often involves farmers growing tea by themselves or for tea production and processing enterprises Each different actor in the tea planting stage will have different behaviors when participating in tea value chain; (2) tea processing: usually involves households or businesses making the transition from fresh tea to commercial teas serving market needs; (3) tea trade (domestic wholesale, retail or export): mainly related to the operation of a commercial enterprise or a household which self-sourcing and satisfying tea demand

1.3 Research orientation of the thesis

- Clarify the concept and description of tea value chain, which is approached from a global value chains and perspective combined with Michael Porter's perspective of competitive advantage;

- Identify and quantitatively evaluate the factors affecting the development of tea value chain, in which emphasizing the role of factors such as economic policy and creating a business environment for businesses;

- Proposing solutions for economic policies and creating a business environment for enterprises to develop tea value chain of Nghe An province, thereby contributing to efficient use of resources

CHAPTER 2: THEORETICAL AND PRACTICAL BASIS OF TEA

VALUE CHAIN 2.1 Tea value chain concept

2.1.1 Characteristics of the tea industry

a Characteristics of the production process

b Characteristics of tea products

c Investment characteristics

d Characteristics of human resources

2.1.2 Concepts and elements of tea value chain

2.1.2.1 Concept of tea i value chain

Tea value chain is developed on the basis of inheriting the concept of value chain by Michael Porter and global CGT of Kaplinsky According to Kaplinsky (2000): “A value chain refers to the set of activities required to transform a product (or service) from conceptual time, through different production stages, to distribution to the end user and dispose of after use A value chain exists when all participants in the chain work to maximize the value of profits in the chain ”

2.1.2.2 Factors participating in tea value chain

Source: Synthesis of Author

Figure 2.1: Tea value chain

Planing Processing Retail Consumption

Export

Retail Wholesale

2.1.3 Factors affecting tea value chain

2.1.3.1 Subjective factors: experience in tea production and trading activities of agents, technology, techniques, capital sources of agents and qualifications of actors

2.1.3.2 Objective factors: institutional environment, consumer adoption with tea brands, business scale and development level of supporting industries

2.2 Model of factors affecting the development of tea value chain

The dependent variable in the model is the ability to increase the value

of tea products (GT), which is evaluated through four sub-criteria: (1) The ability to increase the selling price of tea products to consumers; (2) The ability to increase revenue and profit of enterprises; (3) The ability to satisfy the tastes of the end consumer; (4) The ability to respond to customer needs directly The independent variables include: (1) The responsiveness of the input factor's quality (KN); (2) Effectiveness of economic policy (CS); (3) Level of linkage between actors (LK); (4) Degree of advantage from the business environment (MT)

Relationships between variables can be described through a linear regression model as follows:

2.3.3 Lessons for the value chain development of Nghe An tea

a Enhance participation of actors of value chain

b Develop quality standards, tea production processes to meet the requirements of export markets

c Strengthen the role of government policies

CHAPTER 3: THE CURRENT SITUATION OF TEA VALUE CHAIN DEVELOPMENT OF NGHE AN PROVINCE

3.1 An overview of Nghe An province

3.1.1 Socio-economic conditions of the Province

Nghe An province is located in the center of the North Central region, the North of Thanh Hoa province, the South borders Ha Tinh province, the West borders the Lao People's Democratic Republic Nghe An plays an important role in socio-economic exchanges between North and South, constructing and developing marine economy, external economy and expanding international cooperation In 2019, Nghe An has a population of 3,157,100 people, the gross domestic product (GRDP) of the province in

2019 reached 115,676 billion VND, the average gross domestic product per capita reached 36.64 million VND, the growth rate GRDP reached 8.77%

3.1.2 Results of tea production and trading in Nghe An province

Table 3 1: Tea production and business results of Nghe An province in

Source: Nghe An Department of Agriculture

The tea harvest area of the whole province in 2019 is 10,000 ha with an average growth rate of 9.33%/year Tea productivity of the province in the period 2015 - 2019 did not change much, reaching 120-230 quintals/ha Tea yield of Nghe An is higher than the national average (the whole country in

2019 is 125.9 quintals/ha) and compared to other tea growing provinces in the country, Nghe An tea yield is only lower than 2 provinces - Lam Dong and Thai Nguyen province

3.2 Situation of tea value chain in Nghe An province

3.2.1 Description of tea value chain in Nghe An province

a Planting and taking care of tea

In the period 2015 - 2019, tea is grown mainly in the area of 2 districts Thanh Chuong and Anh Son The average output growth rate in the period

2015 - 2019 is 11.53% /year The district with the largest tea production in the two districts with the largest tea area in the province also has the largest