Research Findings

Viet Nam Publication Abstracts

Competitiveness of Food Processing in Viet Nam: A Study of the Rice, Seafood and Fruit and Vegetables Subsectors

As a member of the Association of South East Asian Nations (ASEAN), Viet Nam is obliged to follow the trade liberalization schedule defined by the ASEAN Free Trade Agreement (AFTA). Under this agreement, Viet Nam will have to reduce the import tariffs on almost all goods imported from ASEAN members to less than 5 percent by 2003. An important question facing the government is how trade liberalization is likely to affect the food processing sector and what it can do to ease the adjustment.

This study sought to identify the likely impact of trade liberalization on the food processing sector in Viet Nam, focusing on four subsectors: rice milling, coffee processing, seafood processing, and fruits and vegetables. In each case, production, marketing, processing, domestic demand and export demand were examined, along with the projected impact of trade liberalization.

It concludes that overall prospects for exports of processed foods in Viet Nam are promising. However, government policy can boost Viet Nam's competitiveness. Most countries progress from exporting unprocessed, undifferentiated commodities toward higher quality, differentiated products. The process is facilitated by a competitive market-oriented (private) food processing sector. To be competitive, countries must be able to respond quickly to changing market conditions. Investment in agricultural and fisheries research is critical, as small changes in the cost or quality of the raw material can greatly affect global competitiveness. Investment in machinery is less important; performance is not a direct function of advanced technology but rather more innovative work practices.

The paper recommends that the government actively foster the liberalization process. It should de-emphasize its role in promoting specific sectors of the economy, and cease to regulate the number of exporters and require approval of the price of export contracts. However, to promote private sector activity, it should strengthen its role in disseminating market information, facilitating coordination, and strengthening business associations. More specifically, it should enable reform of SOEs and the financial sector, promote foreign investment and address common-pool resource issues.

Key words: ASEAN, coffee, common-pool resources, exports, food processing, fruit, seafood, SOEs, trade liberalization, vegetables, Viet Nam

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last updated: April 24, 1999