Vietnam has made remarkable agricultural progress but further policy action is required to address new and emerging challenges. Those are the main conclusions of a new report from the Organisation for Economic Cooperation and Development (OECD).
The OECD Review of Agricultural Policies in Vietnam describes the progress made by the country’s agricultural sector since the Doi Moi reform program started in the mid-1980s. A threefold increase in farm production is credited with a reduction in the proportion of undernourished people from 46 percent in 1990-1992 to 13 percent in 2012-2014. At the same time, the country has become a leading exporter in some foods, including becoming the world’s third-largest exporter of rice and fisheries. The country needs to build on these achievements and at the same time, address new challenges that include a deceleration in output growth, falling commodity prices, limited land resources and growing signs of adverse effects of farming on the environment.
“Vietnam’s agricultural transformation over the past two decades has been nothing short of remarkable,” OECD trade and agriculture director, Ken Ash, said during a launch event in Hanoi with Vietnamese Vice Minister of Agriculture and Rural Development Le Quoc Doanh. “Going forward, Vietnam needs to improve its policy environment, to enable investments that will allow the farm sector to continue to adapt to the opportunities created by rising demand and the challenges of climate change and limited resources. Rising labor costs will open opportunities to adopt new technologies and encourage larger farms but they may also reduce the sector’s overall competiveness, particularly if newer labor-saving techniques are not readily accessible or adaptable to the dominant small-scale farming.”
Vietnam’s pig sector
Pig meat is the second largest sector in Vietnamese agriculture with a 15 percent share, according to the report. Output has increased at an average rate of 6.9 percent per year since 1990 although it has declined in recent years. Almost all pig meat produced is consumed in the country, and export potential is limited by poor meat quality and persistent diseases, according to the report. Local producers are effectively protected from imports by restrictive barriers.
Vietnam’s poultry sector
Average annual growth in poultry meat output in Vietnam is also above the global norm at 5.8 percent, with chickens and ducks widely reared across the country. Prices are not internationally competitive, according to the OECD. Since 2008, imports totaling between US$60 and US$90 million have entered the country, mainly from China and the U.S.
Local farmers will soon find they are losing market share to regional and international rivals, Nguyen Thanh Son, chairman of the Vietnam PoultryAssociation, has warned. Thanh Nien News reports that he was addressing a meeting attended by the agriculture minister in Hanoi a month ago, where there was a call for a case to be brought against the U.S. for “dumping” chicken thighs.
The egg sector in Vietnam is relatively small, according to the OECD report, but it is growing at an average annual rate of more than 6 percent.
Feed and grains
Rice is the leading grain produced in Vietnam in terms of area cultivated, followed by maize. Four-fifths of the maize produced goes into animal feed, while substantial and growing volumes are imported.
Non-farming companies have been showing signs of investing in the agricultural sector, reports Nikkei Asia Review. Steelmaker, Hoa Phat Group, has set up an animal feed subsidiary and it is said to be investing VND300 billion (around $13.3 million) in a feed mill near Hanoi with an annual capacity of 300,000 tons. Production is scheduled to start there by March 2016, followed by another plant in Dong Nai province in the south of the country as well as pig and poultry farms.
The newspaper values Vietnam’s animal feed market at US$7 billion and says it is expanding at an annual rate of around 10 percent. Eighty per cent of the market is covered by local mills belonging to foreign companies, leaving just 20 percent for the 180 or so domestic players.
Other agricultural sectors are also attracting new investors. Vietnamese property company, Hoang Anh Gia Lai, started up a dairy farming business along with other agricultural ventures a few years ago, while 3 Japanese companies have recently invested in rice production in Vietnam.