30. Viet Nam
Viet Nam’s Producer Support Estimate (PSE) has been negative since 2014 and has hovered near -10% of gross farm receipts since 2018, and an average -10.5% in 2020-22. The PSE is largely driven by negative Market Price Support (MPS), which implies taxation of producers. Producers of some import-competing commodities, such as maize, sugar cane, and beef and veal, benefit from tariff protection and hence have positive MPS. However, major export commodities, such as poultry, tea, and natural rubber, are implicitly taxed. Farmgate prices were an average 10% below international reference values.
Budgetary transfers to producers are relatively small and dominated by payments based on variable input use, primarily to cover the cost of exempting farmers from paying an irrigation service fee. The government supports the production of rice by guaranteeing an average level of profit for rice growers equivalent to 30%, executed by the purchase of rice for the national strategic reserve, by prescribing price brackets, and by providing funding to maintain at least 3.5 million hectares of land in paddy. All support to farmers comes in the form of the most production- and trade-distorting measures.1
Support for general services for agriculture (General Service Support Estimate, GSSE) remained constant at 2.2% of the value of production, dominated by allocations to hydrological infrastructure, particularly for irrigation, and to infrastructure development in rural communes, including roads and small irrigation schemes.
The government issued several resolutions, decrees and decisions that lay out plans and targets for the next five to ten years and vision statements for the next 25 to 30 years under the umbrella of the ten-year Socio-Economic Development Strategy (SEDS) for 2021-30. These include the National Sustainable Agriculture and Rural Development Strategy for 2021-30, Vision to 2050, which sets targets for average levels of growth in agricultural value added, labour productivity, and export value. In addition, the National Green Growth Action Plan for 2021-30 delineates tasks and activities to develop a sustainable and low-emissions agricultural sector that is adaptable in the face of climate change.
Viet Nam continues to set ambitious objectives for climate-change mitigation in agriculture and has begun developing mechanisms to advance adaptation within the sector. A decree at the beginning of 2022 strengthened the country’s mitigation target, aiming to reduce greenhouse-gas (GHG) emissions – including from energy use in agriculture – at least 14% (129.8 MtCO2eq) compared to the business-as-usual scenario for 2030 in Viet Nam’s updated Nationally Determined Contribution (NDC) submitted in 2020 under the Paris Agreement. With respect to adaptation, a national strategy was approved to transform agricultural production towards smart adaptation, and indicators were defined to monitor and evaluate progress toward climate-change adaptation objectives.
The Regional Comprehensive Economic Partnership (RCEP) of six Association of Southeast Asian Nations (ASEAN) countries – Brunei, Cambodia, Laos, Singapore, Thailand, and Viet Nam – and four partner countries with which ASEAN has Free Trade Agreements (FTA) – the People’s Republic of China (hereafter “China”), Japan, Australia, and New Zealand – came into force on 1 January 2022. Preliminary evidence suggests that the agreement has already benefitted Viet Nam: foreign trade value for Viet Nam was up about 12% on the year in the first 11 months of 2022, with China the largest importer of Vietnamese agricultural, forestry, and fishery products.2
Viet Nam has established and strengthened commitments to climate-change mitigation and adaptation as defined by national strategy and planning documents. With respect to adaptation, actions planned and undertaken span infrastructure and technological, behavioural and cultural, and social and institutional activities. These include improvements in water-resource infrastructure, breeding new varieties of rice resilient to saltwater intrusion, and developing legal and governance frameworks to support green growth. These actions build resilience in the medium to long term. The establishment of indicators to monitor and evaluate adaptation activities is a laudable and necessary step towards achieving the stated objectives. Continued efforts should document the implementation of adaptation activities and demonstrate their impact.
Although Viet Nam seeks to advance sustainable growth in agricultural productivity, it is unclear if and by how much proposed activities will reduce the substantial environmental degradation caused by current production systems. The National Green Growth Action Plan calls to expand the irrigated land base, which will add to already significant water and energy use and could exacerbate GHG emissions, nutrient surpluses and water-quality deterioration, depending on what crops are grown. Attention should be paid to how planning and strategic visions developed at the national level help or hinder the country’s ability to achieve its mitigation and adaptation targets, and the long-term sustainability of the agricultural sector.
Although the country has made progress reforming state-owned enterprises (SOE), these continue to benefit from preferential access to credit and land, and influence the export of key commodities. Consequently, producers of these commodities are implicitly taxed, receiving commodity prices below international reference levels. Efforts should be made to phase out preferential treatment of SOEs to encourage competition and ensure equal access by private firms to productive resources.
Viet Nam’s integration into the global economy via FTAs such as the RCEP marks an important step towards expanding and diversifying export markets. Domestic producers face challenges to accessing foreign markets, for example arising from more stringent requirements for food hygiene, safety and technical standards. Though plans have been made to improve the quality and safety of agricultural products, efforts should now advance their implementation. In addition, domestic producers will face increased competition from imports. To address this, increased investments should be pursued to help domestic producers become more competitive, such as expenditures on infrastructure and training.
Overview of policy trends
Following its declaration of independence in 1945 and ensuing reunification into the Socialist Republic of Viet Nam in 1975, the Communist Party of Viet Nam initially structured the country according to the Soviet model, which was grounded in central planning and self-reliance. Within this context, agriculture’s primary role was to support the development of heavy industry by providing food at low prices and achieving food self-sufficiency (OECD, 2015[1]). Production was organised around co-operatives and state farms, with SOEs providing inputs and controlling output markets. By the mid-1980s, food shortages and famine were pervasive, as was inflation.
A long series of reforms embedded within the economy-wide program known as Doi Moi or “Renovation” progressively liberalised Viet Nam’s economy and its agricultural sector starting in 1986 (OECD, 2015[1]). The paradigm evolved toward a “law-ruled socialist market economy,” in which the development of agriculture, forestry, and fisheries became a priority for stabilising the economy. The model for agricultural management shifted from co-operatives to farm households, with farmland redistributed in the form of land-use rights, and farm households given the ability to make their own production decisions provided they met certain production quotas. By 1992, prices for most goods and services were determined by markets, though regulation remained for certain commodities, such as fertiliser, sugar, and rice.
From 1993-2000, Viet Nam underwent a period of expansion, in which the country increasingly opened to trade and integrated into the global economy. Reforms introduced more market-oriented policies with the aim of expanding food production for export. A number of these reforms aimed to improve investment and technological innovation, including the 1993 Land Law, the establishment of a national extension service, and credit access for rural households. The Price Stabilisation Fund (PSF) was established to regulate the prices of certain commodities, including urea, paddy and rice, coffee, and sugarcane.
During this period, Viet Nam entered into bilateral and regional trade agreements and partnerships to expand market opportunities, including its accession to the Association of Southeast Asian Nations (ASEAN) in 1995 and its admission to the Asia Pacific Economic Community (APEC) in 1998. Most importantly, the country relaxed restrictions on the export of rice as well as internal barriers to trade between the south and the north. The country saw strong and steady growth throughout the 1990s, in terms of real GDP (7.4% per year) and agricultural output (6% per year), with the relaxation of production quotas, price controls, collectivised agriculture, restrictions on trade and investment, and bans on private enterprises (OECD, 2015[1]; World Bank, 2016[2]). The budgetary expenditure for agriculture quadrupled during this period, with several large-scale projects implemented, such as the Building Canals for All Rice Fields programme (Phan, 2014[3]; Ellis et al., 2010[4]).
From 2000-08, the policy framework aimed to stimulate agricultural and rural modernisation and industrialisation by improving yields, quality, and the value of production. Further international integration, including accession to the WTO in 2007, locked in previous reforms. The remaining few quantitative restrictions on agricultural imports and exports were progressively withdrawn but it was not until the late 2000s that private sector involvement in rice export was encouraged. Prior to this point, the right to export was limited to national and provincial SOEs.
Since 2008, two major resolutions have guided and reoriented agricultural policy development in Viet Nam. The first, the “Tam Nong Resolution”, emphasises the advancement of agriculture, rural development, and farmer livelihoods based on a socialist market economy. Alongside this, a resolution to ensure national food security was issued in response to sharp increases in food prices from 2007-09. The resolution sought to ensure national food security by guaranteeing adequate food supplies, particularly for rice. It set specific targets to preserve land in the production of rice and to ensure a farm-gate price such that growers are guaranteed a certain profit margin above production costs. In March 2021, this resolution was updated through 2030 to stabilise 3.5 million hectares of land in rice production and to ensure an average profit of 35% above production costs.
Over the past 20 years, the overall level of support provided to Viet Nam’s agricultural sector fluctuated at low or negative levels, largely driven by changes in MPS (Figure 30.3). Since 2014, PSE has remained negative, dropping to around -10% in 2018 and remaining at that level since. Total support to agriculture (TSE) has also been negative over the same period, as budgetary transfers to producers and expenditure on general services do not compensate for overall negative MPS.
Main policy instruments
Two of the most important policies governing agriculture are the Master Plan for Agricultural Production Development and the Plan on Restructuring Agriculture in the 2021-2025 Period.3 Both of these decisions contain general objectives to sustainably develop agriculture and rural areas; increase value-added, efficiency, and competitiveness; and improve the life of farmers, contribute to poverty reduction, protect the environment and ecology, and ensure national security.
Domestic price support is the main form of support for Vietnamese producers, particularly in the form of border protection for import-competing commodities such as beef, veal, and sugarcane. In recent years, tariffs for some goods have increased, although they remain within the bounds established by the WTO.
State-owned enterprises (SOEs) have declined in importance through reform and privatisation efforts, though they continue to play a role in the production, wholesale, and international trade of export commodities such as rice, rubber, coffee, and tea, for which the MPS is negative.4 SOEs continue to be afforded privileges in terms of access to capital, natural resources, land, and human resources, which allows them to continue to exert market power, discouraging entry and suppressing farmgate prices (OECD, 2022[5]). Key SOEs that continue to operate in the agricultural sector include the Vietnam Rubber Group (VRG), the Vietnam Southern Food Corporation (Vinafood II), the Vietnam National Coffee Corporation (Vinacafe), and the Vietnam National Tea Corporation (Vinatea).5
There are two main policy instruments used to ensure that rice farmers earn 30% profit above production costs. First, when prices are too low, the government provides concessional loans to rice purchasing enterprises for the temporary storage of rice during harvest. Second, the government considers the profit objective when it determines the annual volume and price of rice that it purchases each year to maintain its national reserve stockpile, managed by the General Department of State Reserves (GDRS) under the Ministry of Finance.
Payments to producers are relatively small and are mainly expenditures to offset the irrigation service fee (ISF) exemption. This exemption from paying a fee to assist with the costs of managing, maintaining, and protecting irrigation works above the “canal gate” has been in place since 2009. In June 2017, the Law on Irrigation was issued, providing for the reintroduction of an ISF for all users. In 2022, funding for the irrigation fee exemption increased by 26.5% at both the central and local government levels, relative to expenditures in 2021.6
Other support based on input use includes central and local government support to provide plant genetic and animal breeding material to farmers at subsidised rates to encourage diversification, improve the quality of production, and support farmers in response to natural disasters and disease outbreaks. Support for producers is also provided through the Socio-economic Development Programme for Ethnic Minorities and Mountainous Areas (known as Programme 135). The programme includes subsidies for agricultural inputs and services such as extension, which represent around 13% of total expenditures under the measure.
Funding for local rice grower support programmes is available at the provincial level to help achieve the paddy land target of 3.5 million hectares. At least 50% of this funding is to be used to support the adoption of new rice varieties, new technologies in rice production, and to promote value chain linkages for the production and sale of rice. Remaining funds are to be used for activities such as periodic soil analyses to guide restoration measures, improvements in land quality, and investments in agricultural and rural infrastructure, including irrigation systems.
Since 2003, most farming households and organisations benefit from a reduction in the land use tax or are exempt from paying it. The exemptions and reductions were initially provided for a seven-year period but have been extended twice and are currently valid until 31 December 2025.
Expenditures on irrigation systems dominate general services for the agricultural sector. In 2020, the government approved the Hydraulic Work Strategy through 2030, Vision toward 2045. The strategy establishes water supply targets for agricultural production and aquaculture and sets other objectives, such as ensuring the supply of water for double-cropping paddy rice fields and ensuring that 85% of the total area is under irrigation. Other targets in the irrigation strategy are improving drainage and environmental protection, preventing and combating natural disasters, and responding to climate change. Targets in the strategy will be achieved through a combination of investments in irrigation infrastructure, improved planning and management of irrigation laws, and technical solutions.
Expenditures on other general services include investments in infrastructure, agricultural knowledge and innovation systems, inspection and control, marketing and promotion, and public stockholding. In 2020, the government approved the Research and Development Programme for Plant and Livestock Varieties Serving Agricultural Restructuring for the Period 2021-30. The programme aims to improve research capacity and the development of agricultural plant and livestock varieties to support the modernisation of the agricultural sector, adaptation to climate change, and the restructuring of agricultural production to improve competitiveness, increase value-added, and promote sustainable development. Total investment in the programme, including private funding, is VND 103 050 billion (USD 4.4 billion) over the lifespan of the project.
Private ownership of land is not permitted in Viet Nam. Rather, all land is owned and administered by the state on behalf of the people. Law allows ownership of a Land Use Right (LUR), under which title holders may conduct real estate transactions, including buying, selling, bequeathing, and leasing land, as well as using land as collateral for mortgages with financial institutions. There are different types of LURs with differing restrictions, limiting the duration of the right,7 the choice of crops, the process for converting paddy land from rice to another crop, and land transfers and exchanges. Agricultural land use plans and support policies favour rice production.
The government regulates exporters of rice to promote stockholding of rice that can be supplied to the market to balance exports and domestic consumption, stabilise domestic rice prices, and fulfil international commitments in the event of natural disasters or crop failures. To obtain a certificate to export rice from Ministry of Industry and Trade (MOIT), companies must have at least one storage and one milling facility that meet national standards and regulations (either owned or leased) and maintain rice reserves equivalent to 5% of the volume shipped in the preceding six months.8 Exporters of organic rice are exempted from the need to obtain a certificate and from the storage and milling conditions.
Following Viet Nam’s accession to the WTO in 2007, the simple average most favoured nation (MFN)-applied tariff on agricultural imports decreased from around 25% in the mid-2000s to 17.1% in 2021. This is slightly lower than the simple average bound tariff on agricultural products of 18.8% (WTO, 2022[6]). Applied tariffs are much lower on imports originating from countries or regions with which Viet Nam signed free trade agreements. For example, the simple average preferential tariff on agricultural imports is just 2.3% from ASEAN members and China, and 4.5% from Australia and New Zealand.
Viet Nam implements trade liberalisation through multilateral, regional, and bilateral trade agreements. It is a member of the WTO, the Association of Southeast Asian Nations (ASEAN), and the Asia-Pacific Economic Cooperation (APEC). The country supports trade liberalisation between ASEAN members and their major trading partners in the region, including China, Japan, India, Korea, Australia, and New Zealand. Outside of ASEAN, Viet Nam has negotiated bilateral free trade agreements with Chile, Cuba, the Eurasian Economic Union, Japan, and Korea. Agreements with the European Union and the United Kingdom came into effect in 2020. Viet Nam, along with ten other countries, signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 8 March 2018. The agreement was ratified by the Vietnamese National Assembly on 12 November 2018, and entered into force on 14 January 2019. In 2022, the Regional Comprehensive Economic Partnership (RCEP) came into force for Viet Nam and 12 other countries, including ASEAN members and partner countries.9
Viet Nam signed and ratified the Paris Agreement on Climate Change in 2016. In its updated Nationally Determined Contribution (NDC), submitted in July 2020, the country committed to reducing 2030 business-as-usual (BAU) greenhouse gas (GHG) emissions of 927.9 MtCO2eq by 9% using domestic resources and up to 27% with international support. This goal represented a less stringent mitigation target than that set in the first NDC. However, in 2022, Viet Nam issued a decree on Mitigation of Greenhouse Gas Emissions and Protection of the Ozone Layer, under which the country strengthened its commitment to mitigation by pledging a 14% reduction from the 2030 BAU. Additionally, Viet Nam signed the Global Methane Pledge and committed to achieving net-zero carbon emissions by 2050 at the COP 26.
These national-level targets have been translated into sector-specific goals for implementation via the National Action Plan on Green Growth for 2021-30, the Action Plan to Reduce Methane Emissions by 2030, and the Scheme on Tasks and Solutions to Implement the Results of COP26. Notably, the latter sets the objective to reduce GHG emissions from agriculture, which accounts for almost one-third of the country’s total emissions, by 43% relative to the 2030 BAU.
Climate change adaptation policies in agriculture
Viet Nam has invested since 2008 in building a legal and planning structure to support climate-change adaptation through the development of strategies, plans, resolutions, and laws. Benchmarks include the National Target Program on Response to Climate Change (2008), the National Strategy on Climate Change (2011), the National Environmental Protection Law (2014), the National Adaptation Plan in Agriculture (NAP-Ag, 2016), and the National Adaptation Plan (2019-2020).10 The Ministry of Natural Resources and Environment (MONRE) oversees activities related to climate change. Within MONRE, the Department of Meteorology, Hydrology and Climate Change (DMHCC) co-ordinates climate-change activities, responses, and strategies. Other ministries are involved in planning and implementation of climate-change initiatives, including the Ministry of Agriculture and Rural Development (MARD), which leads the development of policies specific to agriculture and development.
The 2016 NAP-Ag set out entry points to mainstream climate-change adaptation priorities for the agricultural sector. As part of these, a climate-change vulnerability assessment was carried out for crops, livestock, and aquaculture together with a stocktaking of adaptation measures and Climate-Smart Agriculture (CSA) practices in use. Several pilot projects were carried out, including a salinity monitoring and early-warning system for the Mekong River Delta, a mapping project for landslide disaster risk, rapid capacity assessments of MARD officials and stakeholders in the sector, guidelines for prioritising climate-responsive investments, and training programmes for national and provincial officials on the valuation of climate-change impacts.
Viet Nam prioritised long-term sustainable development as the focus of agriculture policy. The goals of the National Strategy on Green Growth for 2021-30, Vision to 2050 are to:
achieve economic prosperity, environmental sustainability, and social justice
move towards a green, carbon-neutral economy to contribute to global climate-change mitigation
raise the quality, added value, and competitiveness of agricultural production through adjustments and shifts in the composition of livestock, crops, forestry, and aquaculture production.11
The National Green Growth Action Plan for 2021-30 covers 18 subjects and 134 specific tasks and activities organised into 57 groups. The plan seeks to grow agricultural value added 2.5-3% per year while promoting efficient use of natural resources. Among the specific targets for 2030 for agriculture are:12
irrigate at least 30% of dry crop area using advanced water-saving irrigation methods
convert 300 000 hectares (approximately 4%) of rice land to more environmentally friendly and profitable crops13
increase organic cropland to 2% of total crop area and organic livestock products to 2-3% of total production.
The National Strategy on Climate Change to 2050 emphasises transforming the structure of crops and livestock towards smart adaptation to climate change; developing sustainable agriculture, forestry, and fishery value chains; and the complete relocation of at least 70% of households in areas at high risk of natural disasters, flash floods, and landslides.
According to the most recent national communication submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in 2019, action plans at ministerial and local levels are being developed for vulnerable sectors in parallel with national-level programmes. Within the realm of water resources, climate-change adaptation measures have been implemented via Mekong River Delta water planning and supply projects and the Red River Delta programme on water management and climate change adaptation, in addition to city scale climate change programmes for Ho Chi Minh City, Hanoi, and Can Tho.
In 2019, MARD implemented 21 of 54 tasks in the climate change action plan, with total funding of VND 47.18 billion (USD 2.0 million), compared to the VND 402 billion (USD 17.2 million) required for full implementation. The tasks focused on governance (e.g. revising and improving legal frameworks to support green agriculture), technologies (e.g. enhanced use of modern technical solutions), and planning (e.g. accounting for climate-change impacts when using land, water, and other natural resources). The sector has also developed and adopted new rice varieties suitable for inundation conditions and that support intensified production. These include acid- and salt-tolerant varieties currently under development.
The decision, “Approval of the Set of Indicators for Climate Change Adaptation Assessment in Agriculture and Rural Development”, establishes 44 indicators and 54 sub-indicators for monitoring and evaluating climate-change adaptation activities in the sector.
Domestic policy developments in 2022-23
The government has issued numerous resolutions, decrees, and decisions establishing priorities, plans, and targets that apply to the next 5-10 years, as well as vision statements that look forward by 25-30 years. Policy developments in 2022 that carry implications for the agricultural sector include the Sustainable Agriculture and Rural Development Strategy for 2021-30, the National Target Programme for New Rural Construction, and the National Strategy for Development of the Digital Economy. These programmes specify high-level goals, such as achieving growth objectives in agricultural labour productivity, advancing the competitiveness of craft village products, and increasing the percentage of enterprises using digital platforms. Additional strategies specific to the agricultural sector include plans to reduce the use of fertilisers, increase the training of agricultural workers, and promote the sustainable development of macadamia nut production.
A May 2022 decision implements a 2018 decree that provides for agricultural insurance and agricultural insurance assistance to encourage enterprises to sell insurance and to enable producers of agricultural products to insure against production risks. The new decision expands substantially the types of producers eligible. Prior to 2022, assistance in the form of subsidies to offset agricultural insurance premiums were limited to producers of rice, buffaloes, and cows. In 2022, eligibility was expanded to include producers of rubber, pepper, cashew, coffee trees, and pigs. In addition, coverage was expanded to cover risks from a significantly larger set of disease outbreaks relevant to rice production.
MARD issued a plan to ensure food safety and the quality of agriculture, forestry and fisheries products. The plan specifies a series of indicators to achieve, including an additional 2% of production and trading establishments ranked as having a relatively low risk of contamination, a decrease in the proportion of food samples that exceed allowable levels for a suite of contaminants by 10% relative to their level in 2021, and enhanced provision of training courses for central, provincial, and sub-provincial staff. To achieve these objectives, the plan delineates a series of tasks, including the review and revision of policies, standards and technical regulations and dissemination of information on food safety.
The prime minister approved the project Promoting Application of Information Technology to Collection of Information about and Forecasting of State Agricultural Product Markets. The objective of the project is to provide timely information to support regulation and trade, and to enhance the competitiveness, value-added, and sustainable development of Vietnamese agricultural products. The project includes numerous tasks to support analysis and forecasting, including building and operating an in-depth data warehouse; developing human resources via professional training; and developing uniform regulations and guidance on procedures at different levels (central to local government).
In 2022, two measures were adopted that seek to restructure and improve the operational efficiency and competitiveness of SOEs. The decision, Restructuring State-Owned Enterprises, Focusing on State-Owned Economic Groups and Corporations in the 2021-2025 Period, sets the objective of restructuring SOEs by 2025 (VNA, 2022[7]). The Resolution, On the Continuation to Innovate, Improve Operational Efficiency and Mobilise Resources of SOEs, Focusing on Economic Groups and Corporations, recognises the relatively low efficiency of SOEs and defines targets to accelerate reforms (OECD, 2023[8]).
In early 2022, the Ministry of Natural Resources and Environment issued the Decree on Mitigation of Greenhouse Gas Emissions and Protection of the Ozone Layer, which redefines the minimum level of GHG mitigation to be achieved by 2030 as 129.8 MtCO2eq (including energy use in agriculture), which represents a reduction of 14% from the level of emissions in the business-as-usual (BAU) scenario. A number of national strategies and action plans were issued in 2022 that target climate change mitigation and that support national goals to reduce GHG emissions from agriculture by 43% from the BAU scenario and to reduce total methane emissions by 30% in 2030 relative to 2020 levels. An updated list of GHG emission coefficients relevant to agriculture was issued in October 2022.14
Trade policy developments in 2022-23
After ratification by six ASEAN countries (Brunei, Cambodia, Singapore, Thailand, Laos, and Viet Nam) and four partner countries (China, Japan, Australia, and New Zealand) the Regional Comprehensive Economic Partnership (RCEP) entered into force on 1 January 2022 for these 10 countries. The RCEP entered into force with a slight delay for Korea on 1 February 2022, Malaysia on 18 March 2022, and Indonesia on 2 January 2023. RCEP is the largest free trade agreement in the world, covering around 30% of the global population and GDP. Seven of the signatories, including Viet Nam, are intersection economies also belonging to the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
Viet Nam is a mid-sized country in terms of land area, but its population of over 97 million makes it the 15th most populous country in the world (Table 30.3). Almost two-thirds of the population live in rural areas. Since the reforms of Doi Moi in the mid-1980s, the country has seen strong and steady growth in GDP, on the order of 5-7% annually from 2000-19 (Figure 30.4). With the impact of COVID-19, real GDP growth slowed to under 3% in 2020, marking the first time that annual growth fell below 5% in more than two decades. Real GDP growth has not recovered, remaining relatively low, at 2.6%, in 2021.
Although the relative importance of agriculture in the economy has declined over time, agriculture continues to contribute 12.6% to Viet Nam’s GDP and employs 29% of the labour force. The agricultural sector in Viet Nam has undergone significant structural changes in recent decades, reflecting a shift away from staple foods to export commodities, such as rubber and cashew nuts, and to livestock production, particularly pig meat, in response to increased domestic demand. Nevertheless, crops dominate the agricultural landscape, accounting for 63% of total agricultural production in 2021 (Table 30.3). Rice alone plays a dominant role, accounting for around 26% of the value of agricultural production.
With the progressive liberalisation of trade, the value of imports and exports has increased by eight-fold since the early 2000s (Figure 30.5). Imports, in particular, saw a sizable jump from 2020 to 2021, from USD 22.4 billion to USD 31.6 billion. The value of exports has also steadily increased, reaching USD 21.3 billion in 2021. Viet Nam is now one of the world’s largest exporters of a range of agricultural commodities, including rice, coffee, tea, cashew nuts, coffee, black pepper, natural rubber and cassava. However, exports often sell at a discount compared with the same commodities from other leading exporters due to quality differences. Nearly two-thirds of Viet Nam’s agro-food exports are delivered as primary (34%) or processed (31%) goods for household consumption (Figure 30.5). Just over two-thirds of agro-food imports are used as primary (42%) or processed (25%) inputs to production, rather than for household consumption. Key imports into production include livestock feedstuffs, such as oil cake and maize, and raw commodities for further processing and export, like cotton and cashew nuts. The remaining one-third are products to meet food demand from domestic consumers, including for higher-value foods and beverages.
Agricultural production increased by just over 3% on average from 2011-20 (Figure 30.6). This was largely driven by growth in total factor productivity, which outpaced the world average during the same period. Greater use of primary factors and intermediate inputs likewise contributed to Viet Nam’s relatively high level of growth in agricultural output.
However, agricultural production gains have been accompanied by significant pressure on natural resources. The nitrogen and phosphorous balances for Viet Nam exceed the OECD average by a factor of 3.5 and 10.9, respectively (Table 30.1). The share of agriculture in total greenhouse gas emissions is three times greater than the OECD-wide average (though agriculture accounts for a larger share in the economy), and the use of energy and water inputs is also relatively high. The resulting environmental degradation, taken together with the impact of climate change, poses a risk to agricultural production and the capacity of the sector to maintain productivity and output growth moving forward.
References
[4] Ellis, K. et al. (2010), Assessing the Economic Impact of Competition: Findings from Vietnam, Overseas Development Institute, London, https://odi.org/en/publications/assessing-the-economic-impact-of-competition-findings-from-vietnam/ (accessed on 29 March 2023).
[9] Hai, L. (2012), The Rice Situation in Viet Nam, Asian Development Bank, https://www.adb.org/sites/default/files/project-documents//43430-012-reg-tacr-04.pdf (accessed on 14 June 2023).
[8] OECD (2023), OECD Review of the Corporate Governance of State-Owned Enterprises in Viet Nam: Recent and ongoing reforms, https://www.oecd-ilibrary.org/sites/63110c39-en/index.html?itemId=/content/component/63110c39-en (accessed on 23 May 2023).
[5] OECD (2022), OECD Review of the Corporate Governance of State-Owned Enterprises in Viet Nam, Corporate Governance, OECD Publishing, Paris, https://doi.org/10.1787/a22345d0-en.
[1] OECD (2015), Agricultural Policies in Viet Nam 2015, OECD Food and Agricultural Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264235151-en.
[3] Phan, S. (2014), “A Qualitative Review of Vietnam’s 2006-2010 Economic Plan and the Performance of the Agriculture Sector”, Asian Journal of Agriculture and Development, Vol. 11/1, pp. 39-63, https://doi.org/10.37801/ajad2014.11.1.3.
[7] VNA (2022), “Vietnam needs drastic SOE restructuring: experts”, Vietnam+, https://en.vietnamplus.vn/vietnam-needs-drastic-soe-restructuring-experts/223799.vnp?utm_source=link.gov.vn#source=link.gov.vn (accessed on 23 May 2023).
[2] World Bank (2016), Transforming Vietnamese Agriculture: Gaining More from Less. Vietnam Development Report., World Bank, Washington, DC.
[6] WTO (2022), World Tariff Profiles 2022, WTO ITC UNCTAD, https://www.wto.org/english/res_e/publications_e/world_tariff_profiles21_e.htm (accessed on 29 March 2023).
Notes
← 1. The objective of ensuring an average profit of 30% is specified in Resolution No. 63/NQ-CP. Both maximum and minimum prices may be prescribed to support the objective (Hai, 2012[9]).
← 2. https://www.ciie.org/zbh/en/news/exhibition/focus/20230130/36147.html.
← 3. These are, respectively, Decision No. 124/QD-TTg of 2 February 2012 and Decision No. 255/QD-TTg of 25 February 2021. The latter replaced the Agricultural Restructuring Scheme towards Value-added and Sustainable Development, Decision No. 899/QD-TTg of 10 June 2013.
← 4. Producers of these commodities are implicitly taxed in that they receive prices lower than world prices for their outputs. One explanation for the lower prices of these commodities is that SOEs benefit from advantages in access to capital, natural resources, land, and human resources, allowing them to exert significant market power that deters private sector entry and suppresses the farmgate prices of these exported commodities below international reference prices (OECD, 2015[1]).
← 5. The VRG, one of the top ten largest listed companies across all sectors, controls 40% of the land in rubber plantations nationally and 85% of total export production (state ownership ratio 97%). Vinafood II is the country’s largest exporter of rice, with the capacity to process 3 million tonnes per year, and is an exporter also of cassava, maize, beans, cashew nuts, and coffee (state ownership ratio 51%). Vinacafe accounts for 20-25% of coffee bean exports, as well as exports of peppers and cashew nuts, and imports of fertilisers for coffee production (state ownership ratio 100%). Vinatea (converted to Vietnam Tea Corporation Joint Stock Company by decision of the Prime Minister) owns 4 300 hectares of land in tea production (the largest concentrated area in the country) and produces up to 10 000 tonnes of dry tea per year, with exports to 15 countries. State ownership ratios from OECD (2022[5]).
← 6. The Law on Irrigation is Law No. 08/2017/QH14. In 2022, expenditures on the ISF were VND 4.18 trillion (USD 176 million) from the central government and VND 4.72 trillion (USD 201 million) from the local government, compared with VND 3.30 million (USD 144 million) and VND 3.73 million (USD 163 million) in 2021.
← 7. For example, foreigners may retain a LUR for 50 years, while locals may hold one indefinitely.
← 8. Export restrictions for rice provide a policy rationale for negative MPS values until 2017. After that point, formal export restrictions no longer legally apply, but some restrictions remain in terms of maintaining rice reserves. The ongoing presence and role of SOEs in the trade of rice and other export commodities is the most likely explanation for negative MPS values since 2017.
← 9. The RCEP countries are Australia, Brunei, Cambodia, China, Indonesia, Japan, Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Viet Nam.
← 10. https://reliefweb.int/report/viet-nam/viet-nam-integrating-agriculture-national-adaptation-plans-nap-ag-programme.
← 11. https://en.baochinhphu.vn/national-green-growth-strategy-for-2021-2030-vision-towards-2050-11142515.htm.
← 12. https://vccinews.com/news/48753/toward-green-responsible-agriculture.html.
← 13. According to the Viet Nam General Statistics Office, planted area to rice in 2021 was 7 238 900 ha. The target thus represents a conversion of 4.1% of the current land in rice.
← 14. Decision No. 2626/QD-BTNMT dated 10/10/2022, Announcement of List of Emission Coefficients for GHG Inventory specifies the updated emissions factors for agriculture, forestry and land in Appendix III.