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Viet Nam Publication Abstracts

Impact of Rice Export Policy on Domestic Prices and Food Security: Further Analysis Using the Viet Nam Agricultural Spatial Equilibrium Model (VASEM)

This study builds upon earlier work on rice marketing in Viet Nam conducted for the Asian Development Bank (see first abstract), in the course of which IFPRI built a spatial equilibrium model of the markets for rice and three other staple foods in seven regions of Viet Nam. This model, known as the Viet Nam Agricultural Spatial Equilibrium Model (VASEM), allows for the simulation of the effects of removing the rice export quotas on domestic rice prices and food security in Viet Nam. This paper extends the model by allowing the incorporation of more disaggregated data and by improving the analysis of sensitivity in response to changes in key parameters.

It begins by providing simulations of various policy scenarios using this extended model. First, it considers the results of simulating the removal of the rice export quota using the original parameter values. Second, it describes the results of a series of simulations to test the sensitivity of the results to changes in key parameters. The parameters tested are the rice supply elasticity, the income elasticity of rice demand, the elasticity of domestic demand for rice, the elasticity of world demand for Viet Namese rice, the income multiplier to reflect agricultural-non-agricultural linkages, and the rice marketing margin. Third, it examines the impact of the removal of the rice export quota on poverty and food consumption. In particular, it analyzes the effect of removing the rice export quota on different income groups and on the poverty rate, as well as examining the distribution of poor households adversely affected by the policy.

The study concludes that eliminating the rice export quota will raise consumer prices to different extents, depending on the pre-existing degree of integration into the world economy. Consequently, production will increase, consumption fall, and exports increase. After removal of the rice quota, the level of rice prices is not very sensitive to alternative supply and demand elasticities. However the level of exports is quite sensitive to alternative supply and demand elasticities; nonetheless, the increase in exports is significant under all scenarios. The multiplier appears not to have a large effect on any of the key variables except income, and the effect is positive. The marketing margin strongly affects results; a reduced margin tends to moderate or even negate retail price increases associated with export quota removal, and to erode export expansion by diverting exportable rice to the north of the country.

The effects of removing the rice export quota on income distribution is complex, however it appears to improve income distribution in the north and have little effect elsewhere. The removal of the quota reduces poverty somewhat; urban poverty rises slightly, but rural poverty mostly declines. About 6 percent of the population is mildly vulnerable to the removal of quotas, while 3 percent are very vulnerable. Mild vulnerability is concentrated in the north while severe vulnerability is concentrated in the south.

Key words: agriculture, exports, income distribution, liberalization, poverty, quota, rice, trade, vulnerability, Viet Nam

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last updated: April 24, 1999