Research Findings

Viet Nam Publication Abstracts

Rice Market Monitoring and Policy Options Study

Since 1986, Viet Nam has made substantial progress towards becoming a market economy. The role of agriculture, and particularly the development of an efficient and flexible rice marketing system is critical to its growth strategy. Market reforms have moved earlier and far more steadily in agriculture than in other sectors. Nonetheless there remain certain barriers to private sector entry. In the rice sector, there has been a tendency to restrict the number of rice exporters and the volume of exports. Joint ventures with foreign capital are encouraged but foreign investors continue to face bureaucratic obstacles. Access to credit for agro-processing and marketing is restricted to a few agents, mostly SOEs. SOEs are often subsidized and given unfair advantages over private competition.

This study sought to provide technical assistance to the government of Viet Nam in conjunction with an Agricultural Sector Loan in December 1994. Specifically, it undertakes an in-depth investigation of the rice marketing system; identifies the incentives and constraints to its further development; assesses the impact of past policies; and prepares a set of medium term policy options for consideration by the government.

It draws the following conclusions:

• The future growth of the rice sector depends on increased productivity and on a dramatic increase in rice exports
• Viet Nam's considerable rice export potential is seriously limited by constraints related to a) the rice export quota; b) infrastructural bottlenecks aggravated by high shipping fees; c) the poor quality of rice exports; and d) a lack of transparency and credibility.
• Export growth depends on the development of an efficient and effective market system which in turn will require increased private sector participation.
• Main constraints which reduce rice market efficiency, and thus household purchasing power, are a) policy restrictions on rice flows across regions; b) barriers to entry in the export sector; c) limited access to credit for marketing; and d) limited access to information.
• Targeting and income growth are the most effective ways to address food security.

On the basis of these conclusions, the report recommends the following policies:

• dismantling the rice export quota system
• letting the private sector export rice
• removing internal policy restrictions on rice movement and trade
• promoting rice marketing
• ensuring macroeconomic stability, particularly a stable exchange rate
• targeting food security stocks and distribution to food insecure households
• investing in agricultural research to improve yield, quality and post-harvest technology

last updated: February 24, 1999