Research Findings

Viet Nam Publication Abstracts

Trade Distortions and Incentives in Agricultural Trade: The Case of Rice, Sugar, Fertilizer and Livestock Meat-Feed Sub-Sectors in Viet Nam

Despite over a decade of reforms in the agricultural sector. Viet Nam's rural areas - where 80 percent of the population reside - are lagging behind urban areas and the gap is increasing. The decreasing marginal productivity of rice coupled with structural transformations within the economy point to the need for rural economic diversification. The presence of distortions in key sectors of the agricultural economy results not only in the waste of scarce resources, but also in powerful obstacles to a rural development characterized by broad-based rather than regionally-based or commodity specific growth. Several studies have shown strong linkages between agricultural growth and overall rural economic growth through rural industrialization, poverty reduction and accelerating growth of rural incomes.

The objectives of this paper are: a) to provide a review of trade distortions and incentives in the agricultural sector of Viet Nam and b) to suggest policies that facilitate agricultural growth and contribute to the overall development of the rural economy with particular emphasis upon reducing rural poverty, promoting broad-based economic growth and increasing food production. The study focuses on four sub-sectors, rice, sugar, fertilizer and the livestock-feed-meat system. Together, these sub-sectors represent about 80 percent of cultivated land, about 95 percent of agricultural GDP, half of agricultural exports, and provide employment for the majority of the rural population.

The paper discusses several macro-level distortions, namely in land markets; a bias against small and medium enterprises (SME) and a corresponding lack of competition with state owned enterprises (SOE); a lack of participation at the local level; the real exchange rate; and a gap between policy and implementation. It then turns to distortions within the agricultural sub-sectors, focusing upon trade restrictions (in the form of quotas), subsidies, the need for investment, and problems with private sector access and access to credit.

Accordingly, it recommends the following: further liberalizing trade and marketing; fostering the development of small and medium enterprises; promoting the livestock sector; fostering agro-food based industry development; and providing support for units to analyze policy, monitor markets and disseminate market information.

Key words: agriculture, distortions, diversification, exports, incentives, fertilizer, livestock, rice, rural, sugar, trade, Viet Nam

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last updated: May 5, 1999