World Bank urges Vietnam to overhaul agriculture sector

Vietnam has emerged from a poor country in the last two decades where the government used to ration rice and other staples to a lower middle-income nation.

The country’s success, however, has come at a price, said the World Bank in its newly released Vietnam Development Report 2016, titled “Transforming Vietnamese Agriculture: Gaining More from Less”.

“The country’s agricultural output is exacting a price on the environment,” Ousmane Dione, World Bank’s Country Director for Vietnam, said at a press conference Tuesday in Hanoi.

“'Business-as-usual' is no longer an option for the sector–growth has slowed down, it is vulnerable to climate hazards, and leaves a large environmental footprint,” he added.

The Vietnamese government has been consistent with agricultural intensification to achieve its food security targets as well as to boost profits from export earnings in the short term, said Steve Jaffee, the World Bank’s lead agricultural economist.

Vietnam is a relatively heavy user of fertilizer and pesticides. The report estimated that Vietnamese rice farmers use more than 6.7 million tons of fertilizer per year. To put the figure into perspective, the use of fertilizer in Vietnam is from 30–200 percent higher than in other Southeast Asian countries.

Pesticide use in Vietnam has increased sharply since the mid-2000s when the government encouraged more intensive production. Frequent spraying of crops has contributed to growing concerns about pesticide residue. Due to past violations, various Vietnamese products entering developed markets including the U.S. and the European Union are now subject to more frequent sampling and testing.

Vietnam has tolerated some environmental consequences to keep up the momentum of its agricultural sector, and policies have been primarily geared towards expanding output in order to meet food security, economic growth and trade targets.

However, things have not turned out the way they were expected.

Statistics show that between 1994 and 2000, the average rate of annual growth of Vietnam’s agriculture sector was an impressive 4.5 percent. Between 2001 and 2007 the average growth rate fell to 3.3 percent per year, and from 2008 to 2013, it dipped to 2.6 percent.

In the first half of this year, the agriculture sector took a hard hit from the worst drought and saltwater intrusion in nearly a century, said the Ministry of Agriculture and Rural Development, indicating the sector recorded negative growth of 0.18 percent.

Most of Vietnam's agricultural trade is in the form of raw commodities, typically sold at prices lower than those of leading competitors due to quality, said Jaffee.

According to the World Bank’s report, Vietnam’s agriculture sector is at a turning point.

“It’s now not the matter of choice. It’s the matter of must,” said Henning Pederson, the International Fund for Agricultural Development’s Country Director for Vietnam, saying Vietnam cannot afford to wait any longer for agricultural reform.

Higher production volume naturally requires more farm land

The report offers various policy recommendations to address the challenges, of which senior economist Pham Chi Lan stressed the importance of the government recognizing farmers’ land use rights.

It is essential for the government to push forward land reforms and give farmers more property rights, said economist Lan.

She added that it is impossible for farmers to make long-term investments without land ownership. For example, securing a bank loan is a challenge for farmers who do not have land to mortgage.

Lan said Vietnamese lawmakers should revise the law to give farmers some rights in a country where all the land belongs to the state under the constitution.

In an attempt to transform the sector, Vietnam should increase its investment in the sector that contributes 25 percent of the country’s GDP and employs 35 percent of the total workforce, said Nguyen Do Anh Tuan, the director of the Institute of Policy and Strategy for Agriculture and Rural Development.

Official figures show currently only 5-6 percent of Vietnam’s total investment goes to the agricultural sector, and only about 1 percent of foreign direct investment is flowing into the sector, Tuan said.

He added that large-scale farming and well-developed infrastructure are the best way of drawing foreign investors into the agricultural sector.

The government can also play a crucial role by combining fragmented farmland and developing infrastructure, he said.

Experts and economists at the press conference proposed several solutions to transforming the agricultural sector. And the solution, agreed by all, was to call on the government to “lead less and facilitate more”.

Related News:

> Vietnam mulls pooling farmland to boost productivity: official

> Vietnamese farmers indignant as Mekong Delta prays for flood waters to arrive

> Go organic: how to increase the value of Vietnam's rice exports

> Organic farming takes baby steps to meet growing demand

> Drought and salinity rock Vietnam's economy in first half of 2016

> Vietnam looks to divest from all agricultural SOEs by 2017