30. Viet Nam
Support to Viet Nam’s agricultural sector fluctuates between low and negative levels depending on changes in market price support (MPS). In 2019-21, Viet Nam’s producer support estimate (PSE) was -7.7%, implying implicit overall taxation compared to the positive level of support of 6.4% in 2000-02. MPS varies across commodities. Producers of import-competing commodities, such as maize, sugar cane and beef, benefit from tariff protection, while producers of pig and poultry meats, pepper, coffee, tea, and rubber are implicitly taxed. Effective prices received by farmers were 7% lower on average than world prices during 2019-21, though there were large differences between commodities. Rice producers benefit from domestic price support measures that seek to provide rice farmers with a 30% profit on their average production cost. However even with these measures, the price received by farmers in recent years was lower than the export reference price, resulting in a negative MPS. Budgetary transfers to producers are relatively small and dominated by payments based on variable input use – primarily expenditure to offset the irrigation fee exemption.
Support for general services for agriculture (GSSE) was equivalent to 2.4% of the value of agricultural production in 2019-21, up from 2.2% in 2000-02. Expenditure to develop and maintain infrastructure, irrigation in particular, dominates support for general services. Total support to agriculture (TSE) varies between positive and negative values because the combined value of budgetary transfers to producers and expenditure on general services does not always compensate for negative MPS.
In line with its normal planning cycle, the government issued numerous resolutions, decrees and decisions at the start of the current decade, laying out plans and targets for the next 5-10 years and beyond. Of those related to agriculture, the most important include: the Resolution on National Food Security until 2030; the Agricultural Industry Structural Plan for 2021-2025; and the Scheme for Restructuring Viet Nam’s Rice Sector by 2025 and 2030. In January 2021, the Ministry of Agriculture and Rural Development (MARD) approved its plan to respond to the implementation needs set out in the 2020 National Climate Change Adaptation Plan. The plan sets out tasks to be completed by 2025 and 2030. Many involve scaling-up existing production models and techniques.
The support mechanisms introduced in 2020 to offset the impact of the COVID-19 pandemic continued in 2021. These include deferred taxation, monetary payments and concessional credit, with minor changes to improve the effectiveness of their delivery. Further, MARD established two working groups to assist with overcoming obstacles to production and distribution of products from rural areas to cities, caused by restrictions to limit the spread of the virus. Over 250 000 tonnes of rice were distributed from rice reserves in 2021, of which around one-third came from rice-exporting enterprises directed to use reserve stocks they are required to hold for such situations. Tariff reductions for selected products – e.g., wheat, maize, frozen pork and planting seeds – were also implemented to lower cost pressures.
The most significant trade development was the Regional Comprehensive Economic Partnership (RCEP), which came into effect on 1 January 2022. RCEP is the largest free trade agreement in the world, expected to unlock more export markets for Vietnamese agricultural products.
Viet Nam made strong commitments to reduce greenhouse gas (GHG) emissions at the national level and for agriculture, which remains a significant source of emissions. At the 26th United Nations Climate Change Conference (COP26) in 2021, it committed to achieving net-zero carbon emissions by 2050. It also signed onto the Global Methane Pledge, which aims to reduce global methane emissions by at least 30% from 2020 levels by 2030. Rice cultivation is a major source of methane emissions in Viet Nam. The government also set a domestic target to reduce GHG emissions in agriculture and rural areas by 20% every 10 years. However, while Viet Nam announced many ambitious targets, few concrete steps have so far been taken. Action needs to begin soon so that the agricultural sector has time to make the structural adjustments and on-farm practice changes to meet the commitments.
Viet Nam’s integration into the global economy, including through trade agreements such as RCEP and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, brings the agricultural sector opportunities to expand and diversify exports and markets. But these agreements pose challenges to domestic producers, such as increased competition from imports as agri-food tariffs are reduced, and requirements to meet stringent food hygiene, safety and technical standards in export markets.
Efforts are needed to improve the sector’s competitiveness and environmental sustainability. Opportunities to increase production by expanding agricultural land area and using higher rates of fertilisers are fully exploited, and negative environmental impacts are increasing. While these are challenges for Viet Nam, they can create economic incentives to adopt new technologies, consolidate farms and increase the scale of production, and focus on improving quality.
The low cost of water encourages overuse and increases the agricultural sector’s vulnerability to drought. While legal requirements for re-introducing a fee for irrigation services were established, they have yet to be implemented. This would reduce the burden on the state budget and sharpen incentives to increase water productivity. Higher cost recovery would also gradually increase the budgets of irrigation management companies, which should lead to better service.
Farm consolidation could be encouraged to improve the allocation of scarce land resources, including various forms of co-operation between farmers. In addition, restrictions on crop choice should be removed. This can help small-scale farming households connect to market opportunities and participate in value chains.
The review of regulations controlling rice exports provides an opportunity to improve competitiveness and quality. Viet Nam has taken many steps over the past two decades to open the rice export trade to competition and these should continue as the result of the current review.
Overview of policy trends
A long series of reforms since the late-1980s have progressively liberalised Viet Nam’s agricultural sector.1 Agricultural reforms were embedded into the economy-wide programme of reforms (Doi Moi) initiated in 1986, which transformed Viet Nam from a centrally planned to a socialist-oriented market economy. Prior to these reforms, agriculture’s primary role was to support Viet Nam’s industrialisation by providing food at low prices. Agricultural production was organised around co-operatives and state farms, with state-owned enterprises providing inputs and controlling output markets. Under the new policy framework, agriculture was elevated to primary importance. The focus of agricultural management moved from co-operatives to farm households, with farmland redistributed in the form of land use rights2 and farm households given the ability to make their own production decisions provided they met certain quotas. Broader reforms opened the market to both greater domestic and international competition.
From the early 1990s, reforms introduced more market-oriented policies with the aim of expanding food production for export to generate foreign exchange earnings. A number of these reforms aimed to improve investment and technological innovation. These included the Land Law 1993, the establishment of a national extension service and credit facilities for farmers via increased government funding to the Vietnam Bank for Agriculture and Rural Development (VBARD). The compulsory production quota system and the agricultural output tax were replaced with a land use tax, giving farmers a greater say in marketing their production. Viet Nam also entered into many bilateral and regional trade agreements and partnerships to expand market opportunities.3 The improved policy environment was supported by a rapid increase in budgetary expenditure, including on irrigation infrastructure. At the same time, a Price Stabilisation Fund was created to stabilise the prices of essential commodities including urea, paddy and rice, coffee, and sugarcane.
From 2000, the policy framework aimed to stimulate agricultural and rural modernisation and industrialisation by improving yields, quality and the value of production. Further international integration at the bilateral, regional and multilateral level locked in previous reforms and motivated further actions. The remaining few quantitative restrictions on agricultural imports and exports were progressively withdrawn. For example, it was not until the late 2000s that private sector involvement in the rice export trade was encouraged. Prior to this, even though the rice export quota had been expanding, from less than 1 million tonnes in 1992 to 4.5 million tonnes by 1998, the right to export was limited to national and provincial state-owned enterprises (SOEs).4 However, even after the private sector was permitted to export rice, the government maintained a large degree of control over export activity until 2016. Exporters had to meet specific milling and storage requirements, the minimum export price had to be respected (to limit price declines), and certain administrative functions were given to the Viet Nam Food Association (VFA).
Since 2008, two major resolutions have guided agricultural policy development in Viet Nam. Resolution No. 26/NQ-TW dated 5 August 2008 (commonly referred to as the Tam Nong resolution) emphasises agricultural and rural development based on the market economy with socialist orientation. It sets broad goals of building a modern and stable agricultural sector, developing rural areas, and improving the life of rural residents.5 Alongside this, sat government Resolution No. 63/NQ-CP dated 23 December 2009. This sought to ensure national food security by guaranteeing adequate food supplies, particularly for rice. It included specific targets of maintaining 3.8 million hectares of rice land and a farm-gate price for rice that provides growers with a profit of 30% above production costs. Resolution No. 63 was replaced by Resolution No. 34/NQ-CP dated 25 March 2021 on ensuring national food security until 2030. Like its predecessor, the overall goals of Resolution No. 34 include ensuring enough food supply for domestic consumption in all circumstances while allowing for exports, and increasing incomes of people so they can purchase good quality and safe food. The list of specific goals includes stabilising 3.5 million hectares of land in rice production and a target that rice farmers in large-scale production areas have an average profit of 35% above production costs.
These resolutions are implemented through numerous policy documents. Two of the most important are the master plan for agricultural production development (Prime Minister’s Decision No. 124/QD-TTg dated 2 February 2012) and the agricultural restructuring scheme towards value-added and sustainable (Prime Minister’s Decision No. 899/QD-TTg dated 10 June 2013).6 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. The later was replaced in 2021 with a new agriculture industry structural plan for 2021-2025 (Prime Minister’s Decision No. 255/QD-TTg dated 25 February 2021).
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 market price support (MPS). Total support to agriculture (TSE) varies between positive and negative values, as in some years budgetary transfers to producers and expenditure on general services do not compensate for overall negative MPS.
Main policy instruments
Domestic price support is the main form of support for Vietnamese producers, with border protection being the main tool used. Domestic price support varies across commodities. Tariffs protect producers of import-competing commodities, such as beef and veal, and sugar cane. Producers of export commodities, such as natural rubber, coffee, cashew nuts and tea are implicitly taxed in that they receive prices lower than world prices for their outputs. There are two main policy instruments used in response to the objective of providing rice farmers a 30% profit above production costs. When prices are too low, the government provides concessional loans to rice purchasing enterprises for the temporary storage of rice during harvest. The government also considers this 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.7
Payments to producers are relatively small. Expenditure associated with the irrigation service fee (ISF) exemption is the dominant form of budgetary support. 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, a new Law on Irrigation (Law No. 08/2017/QH14) was issued, providing for the reintroduction of an ISF for all users. However, while the framework for reintroducing the ISF has been established, it has yet to be implemented.
As part the measures introduced to achieve the policy target of keeping 3.8 million hectares in paddy rice production, the government introduced for the first time in 2012 an area payment to rice farmers.8 The initial payment rates of VND 500 000 (USD 22)/ha/year for land under wet paddy cultivation9 and VND 100 000 (USD 4)/ha/year for other rice land, except upland fields not under paddy land-use plans, were increased in 2016 to VND 1 million (USD 43)/ha/year and VND 500 000 (USD 22)/ha/year respectively.10 In 2019, while maintaining the objective of protecting land for rice cultivation, the government replaced the direct area-based payments with increased funding for local rice grower support programmes at the provincial level.11 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, improving land quality, and investments in agricultural and rural infrastructure. Local authorities can determine the form of support provided based on local needs. Detailed information on how funding is being spent is presently unavailable, but it is being used to maintain irrigation systems.
Support programmes based on input use include those that provide plant genetic and animal breeding material to farmers at subsidised rates. At the national level, these are often part of a package for farmers recovering from natural disasters or disease outbreaks. Payments to farmers following natural disasters and epidemics are set by the government under Decree No. 02/2017/ND-CP dated 9 January 2017. For example, in response to African swine fever in 2019-2020, which reduced the national pig herd by more than 20%, the government provided financial support to compensate producers for animals that had to be culled. Since 2009, several policy packages were introduced to provide farmers subsidised credit to purchase inputs and assets for agricultural production (fertilisers, pesticides, machinery and equipment).
Since 2003, most farming households and organisations are exempt from paying agricultural land use tax or benefit from a land tax reduction. The exemptions and reductions were initially provided for a seven-year period but were extended in 2010 for a further ten-year period to the end of 2020.12 In June 2020, the government extended the exemption for a further five-years out to 31 December 2025 (Resolution No. 107/2020/QH14).
Expenditures on irrigation systems dominate general services for the agricultural sector. In January 2020 the government approved Viet Nam’s irrigation strategy to 2030, with a vision to 2045 (Decision No. 33/2020/QD-TTg). The strategy establishes water supply targets for agricultural production and aquaculture, among 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. By 2030, 30% of the total area should be cultivated with advanced methods, and 60% by 2050. Other targets in the irrigation strategy are improving drainage and environmental protection, and preventing and combating natural disasters, and responding to climate change, including by responding to drought, saltwater intrusion, floods, and riverbank and coastal erosion. 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 on infrastructure provided through rural development Programme 135, agricultural knowledge and innovation systems, inspection and control, marketing and promotion, and public stockholding. The government approved the research and development programme for plant and livestock varieties serving agricultural restructuring for the period 2021-30 (Decision No. 703/QD-TTg dated 28 May 2020). The programme aims to improve research capacity and the production 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 is VND 103 050 billion (USD 4.4 billion) over the period 2021-30, including private funding.
All land is owned and administered by the state on behalf of the people. Farmers have land user rights, and benefit from a wide range of rights, including the right to rent, buy, sell and bequeath land, and to use land as collateral for mortgages with financial institutions. However, there are restrictions on land use including the duration of land use rights, 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.
Viet Nam launched the National Adaption Plan in Agriculture (NAP-Ag) in 2016 with the primary objective of identifying entry points for mainstreaming climate change adaption priorities for the agricultural sector.13 As part of NAP-Ag, a climate change vulnerability assessment was carried out in the agricultural sector (crop, livestock and aquaculture) together with a stocktake of climate change adaption measures and CSA practices in use in the sector. A salinity monitoring and early warning system was also piloted in some provinces of the Mekong River Delta (MRD) to keep farmers informed about salinity levels. A pilot mapping of landslide disaster risk was carried out in 13 mountainous provinces, and scaled-out to the whole country in 2018. Further, to successfully integrate adaptation priorities in the NAP-Ag, the capacities of MARD officials and other stakeholders in the agriculture sector were built through rapid capacity assessments, the formation of a Technical Working Group within MARD, the development of guidelines on prioritizing climate-responsive investments (especially in the Mekong Delta) and trainings for national and provincial officials on valuation of climate change impacts (FAO and UNDP, 2020[2]). In 2020, the Prime Minister approved VND 530 billion (USD 22.8 million) in financial support to prevent and combat drought, water shortages and salinisation in eight provinces in the MRD, including the impacts on agriculture (Decision No. 504/QD-TTg dated 10 April 2020). The funding will be used to implement urgent measures such as pumping water; dredging canals and ditches, and building temporary dams to prevent salinity to maintain fresh water; and digging ponds and wells for storing fresh water.
In January 2017, in line with the Investment Law of 2014, Viet Nam’s Ministry of Industry and Trade (MOIT) abolished Decision No. 6139/2013/QD-BCT, which capped the number of rice exporters at 150 and stipulated strict conditions for becoming a rice exporter. The government further relaxed export conditions on rice through Decree No. 107/ND-CP dated 15 August 2018.14 To obtain a certificate to export rice from MOIT under the new Decree, companies must now have at least one storage and one milling facility that meet national standards and regulations, which can be owned or leased, and maintain rice reserves equivalent to 5% of the volume shipped in the preceding six months.15 Decree 107 also removed the requirement to register export contracts and the regulations on setting minimum export prices.
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 16.5% in 2020. This is slightly lower than the simple average bound tariff on agricultural products of 18.8%. But it is almost double the simple average MFN applied tariff on non-agricultural goods of 8.4% (WTO, 2021[3]). 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 the People’s Republic of China (hereafter “China”), and 4.5% from Australia and New Zealand.
Since joining the World Trade Organization (WTO) in 2007, Viet Nam has progressed towards implementing the requirements of the Sanitary and Phytosanitary Agreement. However, the regulatory regime still suffers from limited enforcement capacity, poor co-ordination and many overlapping regulations.
Viet Nam implements trade liberalisation through multilateral, regional and bilateral trade agreements. It is a member of the WTO, Association of Southeast Asian Nations (ASEAN) and Asia-Pacific Economic Cooperation (APEC), and 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, the European Union, Japan, Korea, and the United Kingdom, with the agreements with the European Union and the United Kingdom coming 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 2018.16 The agreement was ratified by the Vietnamese National Assembly on 12 November 2018, and entered into force on 14 January 2019.
Climate change mitigation policies in agriculture
The agricultural sector accounts for almost one-third of Viet Nam’s GHG emissions (Table 30.4). Viet Nam signed and ratified the Paris Agreement on Climate Change in 2016. Its initial Nationally Determined Contribution (NDC) submitted in 2015 committed to reducing estimated 2030 business-as-usual (BAU) GHG emissions of 787.4 MtCO2eq by 8% using domestic resources, and up to 25% conditional on receiving international support. In the updated NDC Viet Nam submitted in July 2020 (Government of Viet Nam, 2020[4]), the 2030 BAU GHG emission level was revised up 18% to 927.9 MtCO2eq, with the commitment made to reduce this level by 9% using domestic resources and up to 27% with international support.17 Consequently the new 2030 commitment level is 17% higher than that set in 2015 (844 MtCO2eq compared to 724 MtCO2eq).
At COP26, Viet Nam committed to achieving net-zero carbon emissions by 2050. In addition, Viet Nam signed onto the Global Methane Pledge, which aims to reduce global methane emissions by at least 30% from 2020 levels by 2030. As rice cultivation is identified as a major source of GHG emissions, particularly methane, Viet Nam is actively looking into solutions for emission reductions in this sector. Viet Nam also committed to ending deforestation by 2030 in signing the Glasgow Leaders’ Declaration on Forest and Land Use.
The National Strategy for Climate Change was approved in 2011 (Decision No. 2139/QD-TTg dated 5 December 2011). The strategy tasks the agricultural sector with reducing GHG emissions by 20% every ten years while increasing gross production by 20% and reducing the poverty rate by 20%. The National Strategy on Green Growth for 2021-30, with a vision to 2050, sets the goal of a green and carbon-neutral economy that contributes to limiting global warming (Decision No. 1658/QD-TTg dated 1 October 2021). To reduce the intensity of GHG emissions per GDP (target reductions of at least 15% compared to 2014 levels by 2030 and 30% by 2050), the agricultural sector’s targets are to maintain forest cover at 42% to 2030 and 42-43% to 2050, and apply advanced and water-saving irrigation methods to 30% of total irrigated dry crop area by 2030 and 60% by 2050.
In March 2020, MARD approved its Plan to Implement the Paris Agreement on Climate Change for 2021-30.18 It sets out MARD’s plan in detail for undertaking the 41 compulsory, prioritised or encouraged tasks for the sector as per the government’s 2016 action plan to implement the Paris Agreement (Decision No. 2053/QD-TTg dated 28 October 2016). Key tasks for MARD include reducing GHG emissions in the agriculture and rural development sector, and establishing measurement, reporting and verification systems (MRV) for the agricultural sector and the land use, land use change and forestry (LULUCF) sectors. To reduce GHG emissions in agriculture and rural areas by 20%, these plans and programmes prioritise research on selection and production of plant varieties and animal breeds able to minimise GHG emissions and adapt to climate change, and the adoption of more sustainable practices and climate smart agriculture techniques. Actions to implement the tasks include: human resources training and capacity building; reviewing and adjusting mechanisms, policies, and sectoral plans in accordance with the Paris Agreement on Climate Change; applying scientific and technological solutions; international co-operation; and mobilising financial resources, including in the form of public-private partnerships with domestic and foreign businesses.
In the same month, the Prime Minister approved the Master Programme on Sustainable Agricultural Development and Adaptation to Climate Change in the Mekong River Delta (MRD) to 2030, with a vision to 2045 (Decision No. 324/QD-TTg dated 2 March 2020). The Master Programme establishes economic, social and environmental targets for the agricultural and rural sector in the MRD, and actions to achieve those targets. Among them is a goal to reduce GHG emissions from agriculture in the region by 20% compared to 2010. Actions include: reviewing and adjusting regional and provincial development plans towards sustainable transformation and climate change adaptation; the application of science and technology; and capacity-building for natural resource and environmental management.
Domestic policy developments in 2021-22
In line with its normal planning cycle, the government has issued numerous resolutions, decrees and decisions at the start of the decade outlying plans and targets for the next 5-10 years, and beyond. Some of the important high-level ones issued in 2021-22 that have implications for the agricultural sector include:
The 5-year Socio-Economic Development Plan (SEDP) for 2021-25 – sets national level economic, social and environmental targets, including for productivity growth, poverty reduction, waste collection, etc. (Resolution No: 16/QH15 of the National Assembly dated 27 July 2021).
The resolution on ensuring national food security until 2030 – includes a specific target of maintaining 3.5 million hectares for rice cultivation and producing an annual total of at least 35 million tonnes of rice (Resolution No. 34/NQ-CP of the Government dated 25 March 2021).
The national scheme for high-tech development by 2030 – includes a specific target of 200 agricultural high-tech enterprises (Decision No. 130/QD-TTg of the Prime Minister dated 7 January 2021).
The national strategy for disaster prevention and response to 2030, with vision to 2050 – sets targets to reduce damage caused by natural disasters such as death tolls and economic losses (Decision No. 379/QD-TTg of the Prime Minister dated 17 March 2021).
The scheme for increasing community awareness and community-based disaster risk management by 2030 – sets targets for the provision of information and the development of plans for different groups (Decision No. 553/QD-TTg of the Prime Minister dated 6 April 2021).
Those specifically relating to agriculture include:
The national land use master plan for 2021-30, vision to 2050 – sets the requirements of maintaining 3.5 million hectares of paddy land and ensure forest cover of 42-43% out to 2030 (Resolution No. 39/QH15 of the National Assembly dated 13 November 2021).
The agricultural industry structural plan for 2021-25 – sets specific goals for the agricultural sector (such as achieving an average annual value-added growth of 2.5-3%), and specific land area and production targets for key national product groups, e.g. reduce the area in coffee to 670 000 ha and achieve annual output of 1.8-1.9 million tonnes (Decision No. 255/OQ-TTg of the Prime Minister dated 25 February 2021).
The scheme for agricultural biotechnology development by 2030 – involving the mastering of new-generation biotechnologies, a 30% increase in the number of bio-industrial enterprises in agriculture, support for infrastructure capacity, and training of human resources (Decision No. 429/QD-TTg of the Prime Minister dated 24 March 2021).
The scheme for restructuring Viet Nam’s rice sector by 2025 and 2030 – sets specific objectives such as maintaining 3.6-3.7 million hectares in paddy production by 2025 (3.5 million hectares by 2030), ensuring annual rice production of 40-41 million tonnes by 2025 (at least 35 million tonnes by 2030); reduce use of chemical fertilisers and agrochemicals in rice production by at least 30% by 2025 (40% by 2030); reduce GHG emission in rice production by 5% by 2025 (10% by 2030); and ensure that farmers receive at least a 30% profit (both 2025 and 2030) (Decision No. 555/QD-BNN-TT of MARD dated 26 January 2021).
Policies to support the uptake of insurance by agricultural producers have continued to be adopted. While the eligibility period for premium subsidies was initially available from 26 June 2019 to 31 December 2020, it was extended to the end of 2021 by Decision No. 03/2021/QD-TTg dated 25 January 2021. Individuals engaged in rice, cattle and aquaculture production in specified provinces and centrally run cities receive subsidies for insurance premiums of up to 90% for those classified as being in or near poverty and up to 20% for all others. In addition to subsidies, other work is being carried to boost farmer demand and uptake through education and awareness raising. For example, the International Fund for Agricultural Development (IFAD) is working in partnership with the government to provide training for trainers and farm-friendly teaching materials covering the basics of how insurance works.19
On agricultural regulation, a ban on the use of crop protection products containing glyphosate came into effect on 1 July 2021. Originally announced in 2019 to take effect from 1 July 2020, a one-year extension for the commencement of the ban had been provided in June 2020.
In January 2021 MARD approved its plan to respond to the implementation needs set out in the 2020 National Climate Change Adaptation Plan.20 The plan sets out various tasks to be completed by 2025 and 2030. For example, one of the tasks to improve resilience of the agricultural sector is to reform support mechanism and policies on land, finance and techniques for enterprises engaged in the development of large-scale agricultural adaption models. Many tasks involve scaling-up the use of existing models and techniques.
Domestic policy responses to the COVID-19 pandemic
During 2021, the government continued to use a range of measures to contain the spread of COVID-19, including the closure of borders, social distancing orders; the closures of schools, food service enterprises, and wholesale and wet markets; restrictions on movements; and the scaling down or shutdown of industrial parks, export processing zones, and livestock slaughtering and processing facilities. Consequently, the support mechanisms introduced in 2020 to help alleviate the impact of these measures on business, including deferred taxation, monetary payments and concessional credit, continued in 2021.
For example, the ability for enterprises, individuals and household businesses affected by the COVID-19 pandemic to defer payment of value added tax, corporate income tax, personal income tax, and land rental fees was extended in 2021.21 Enterprises, organisations, households and individuals engaged in agricultural, forestry and fishery production, and food production and processing, are among the subjects that are eligible to defer payments of tax and land rent.
Similarly, the provision of monetary payments to household businesses, employers and employees, including enterprises engaged in agricultural production, food production or processing, introduced in 2020,22 were modified in 2021 to make it easier to access the payments.23 Due to administrative difficulties encountered in accessing the payment, not all the budget allocation was distributed in 2020. As a further measure, the government has enabled employers impacted by the epidemic to both access unemployment benefits from and reduce their contribution rate to the Unemployment Insurance Fund.24
Concessional credit measures continued in 2021. These include an interest-free loan facility at the State Bank of Viet Nam (SBV) to assist businesses pay wages during periods when lockdown restrictions prevented employees working, and support to credit institutions and foreign bank branches to restructure debt repayment terms, exempt or reduce interest and fees.25 Total borrowings of the agricultural and rural areas reached more than VND 2.5 million billion (USD 108 billion) towards the end of 2021, up more than 10% on a year earlier. This includes both commercial loans and low interest rate borrowings from the Bank of Social Policies.
Viet Nam also used its state reserve system, managed by the GDSR, to respond to the pandemic. Each year the GSDR purchases between 150-300 000 tonnes of rice. In 2020, Viet Nam purchased 270 000 tonnes of rice, including 80 000 tonnes of paddy (unhusked) rice, to ensure domestic food availability during the COVID-19 pandemic. During 2021, over 250 000 tonnes of rice was distributed from rice reserves, of which 75 413 tonnes came from rice exporting enterprises who were directed to distribute this from the reserve stocks they are required to hold for such an occasion. The government announced in September 2021 that it will purchase an additional 172 900 tonnes to rice for the national reserve.
In July 2021 MARD established two working groups – one for the north and one for the south – to assist with overcoming the obstacles to production, harvest, transportation and distribution of product from the rural areas into the cities caused by COVID-19 restrictions. The working groups co-ordinated activities with other ministries, local governments, industries, businesses and cooperatives. COVID-19 has accelerated the use of digital platforms to connect suppliers and customers, and strengthened the linkages along the marketing chain.
Trade policy developments in 2021-22
On 15 November 2020, Viet Nam along with its nine other ASEAN partners and five other regional states with which ASEAN has existing free trade agreements signed the Regional Comprehensive Economic Partnership (RCEP or ASEAN+5).26 The RCEP primarily focuses on the regulations for market entry and investment, combining and deepening the existing ASEAN agreements. By early December 2021, six of the ten ASEAN signatories, including Viet Nam, and all five non-ASEAN signatories had ratified the agreement meaning that the trade pact took effect on 1 January 2022 for most members. RCEP is the largest free trade agreement in the world, covering around 30% of both global population and GDP. Seven of the 15 RCEP signatories, including Viet Nam, are intersection economies also belonging to the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
RCEP and CPTPP are expected to unlock more export markets for Vietnamese agricultural products. In additional to improved access for tropical agricultural products and processed foods, export opportunities will be enhanced by a simplification of import and export procedures and more consistent rules of origin. MARD is working closely with MOIT to organise trade promotional missions to key export markets. It is also negotiating with its regulatory counterparts to remove technical barriers for Vietnamese agricultural products, especially fruits. COVID-19 restrictions have also created difficulties transporting agricultural exports across land borders. At the end of 2021, a record 5 000 or so container trucks carrying agricultural products were waiting at the northern border gates of Lang Son and Mong Chai to enter China.
MOIT is currently consulting on amending and supplementing Decree No. 107/2018/ND-CP which controls businesses involved in rice exports. This may amend requirements on business to own or lease minimum sized rice storage and processing facilities.
Trade policy responses to the COVID-19 pandemic
In response to rising prices as consumers stockpiled rice in response to the COVID-19 outbreak and impending lockdown, and in the context of a severe drought in the Mekong River Delta, the government announced in late March 2020 that it would not permit any new rice export contracts to be signed (FAO, 2021[5]). At the same time, rice traders were ordered to release their reserves onto the domestic market. However, the decision to suspend new rice export contracts was revised on 3 April 2020 in favour of a monthly 400 000 (revised up to 500 000) tonne export quota, allocated on a first-come, first-served basis. Furthermore, in late April it was declared that rice exports would resume unrestricted as of 1 May 2020.
Tariff reductions have been implemented to lower cost pressures. Most Favoured Nation (MFN) tariff reductions for wheat, maize, frozen pork and planting seeds were provided for in Decree No. 101/2021/ND-CP of 15 November 2021. This followed similar decisions in 2020 to reduce tariff rates on dairy products, ethanol, almonds, apples, grapes, wheat, walnuts, frozen potatoes, raisins, and chilled and frozen pork.
Viet Nam is a mid-size country in terms of area, but its population of over 96 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 mid-1980s, a long series of reforms have moved the economy, including the agricultural sector, in the direction of open markets for trade and investment, private sector decision-making, private land use rights, and a greater role for private firms. These reforms resulted in rapid, stable and inclusive economic growth, transforming Viet Nam from one of the world’s poorest nations to a lower middle-income country, and contributing to significant reductions in poverty rates and improvements in other social outcomes, including in rural areas. Viet Nam’s economic growth over the past 20 years has been remarkably strong and steady (Figure 30.5). Due to the impact of COVID-19, real GDP growth slowed in 2020 to just under 3%, marking the first time that annual growth has been below 5% in more than two decades.
The agricultural sector in Viet Nam has undergone significant structural changes in recent decades, reflecting a shift away from staple foods to export commodities, in particular perennial crops such as rubber and cashew nuts, and to livestock production, particularly pig meat, in response to increased domestic demand. Nevertheless, crops dominate with rice accounting for around 26% of the value of agricultural production. Agricultural production has more than tripled in volume since 1990. While the relative importance of agriculture in the economy has declined over time, agriculture remains an important sector, contributing 14% to Viet Nam’s GDP, employing 37% of the labour force, and is the largest source of income for a significant share of rural households.
The agro-food sector is well integrated with international markets (Figure 30.6). Agro-food exports have increased eight-fold since the early 2000s. Viet Nam is now one of the world’s largest exporters of a wide 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. Two-thirds of Viet Nam’s agro-food exports are delivered for household consumption without further processing in the export market. Agro-food imports have also increased significantly and since 2018 now exceed agro-food exports in value terms. Around two-thirds of agro-food imports are used as inputs into production rather than for household consumption. Key imports into production include livestock feedstuffs such as oil cake and maize (about 90% percent of animal feed ingredients are imported), 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 3.2% p.a. on average between 2010 and 2019, driven by total factor productivity growth, which was slightly below the global average at 1.2% p.a., and greater use of primary factors and intermediate inputs (Figure 30.7). However, agriculture places significant and growing pressure on natural resources. Excessive use of fertilisers, pesticides and other chemicals has contributed to a gradual degradation of water and land quality (Table 30.4). This, together with the impact of climate change, poses a significant risk to agricultural production and the capacity of the sector to maintain productivity and output growth.
References
[5] FAO (2021), Agricultural trade & policy responses during the first wave of the COVID-19 pandemic in 2020, FAO, Rome, https://www.fao.org/3/cb4553en/cb4553en.pdf.
[2] FAO and UNDP (2020), Integrating Agriculture in National Adaptation Plans (NAP-Ag) Programme: Viet Nam case study, https://reliefweb.int/report/viet-nam/viet-nam-integrating-agriculture-national-adaptation-plans-nap-ag-programme.
[4] Government of Viet Nam (2020), Updated Nationally Determined Contribution (NDC), July 2020, https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Viet%20Nam%20First/Viet%20Nam_NDC_2020_Eng.pdf.
[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] WTO (2021), World Tariff Profiles 2021, WTO ITC UNCTAD, https://www.wto.org/english/res_e/publications_e/world_tariff_profiles21_e.htm.
Notes
← 1. A detailed review of Viet Nam’s agricultural policies since Reunification in 1976 can be found in OECD (2015[1]).
← 2. Private ownership of land is not permitted. Instead, enterprises, households and individuals own land use rights, including the right to rent, buy, sell and bequeath land, and to use land as collateral with financial institutions for mortgages (Land Law of 1993).
← 3. In 1995 Viet Nam became a member of the Association of Southeast Asian Nations (ASEAN) and its associated ASEAN Free Trade Area (AFTA). Viet Nam was formally admitted as a member of the Asia Pacific Economic Community (APEC) in November 1998. In December 2001, the US-Viet Nam Bilateral Trade Agreement came into effect. In 2007, Viet Nam obtained WTO membership.
← 4. State-owned enterprises (SOEs) no longer play the dominant role in agricultural production that they once did. Coffee, rubber and sugar are the exemption. However, SOEs still have a considerable degree of influence over some agricultural sectors through their involvement in supplying inputs, processing outputs and trading products. For example, SOEs account for more than half of total rice exports.
← 5. Resolution No. 26 is currently being reviewed with the intention of issuing a revision.
← 6. Pursuant to this scheme, the Prime Minister issued Decision No. 1819/QD-TTg dated 16 November 2017 approving the plan of restructuring the agricultural sector for the period 2017-2020.
← 7. Other agricultural related products held in the national reserve include rice, maize and vegetable seeds, pesticides, and animal vaccines and antiseptics.
← 8. Decree No. 42/ND-CP dated 11 May 2012 on the management and use of land for rice cultivation and in effect from 1 July 2012.
← 9. Wet-paddy farming land is defined as land currently under wet-paddy cultivation or having the conditions for growing two or more wet-paddy crops a year; other paddy farming land is defined as land for growing only one wet-paddy crop a year and land for growing upland rice. Approximately 95% of current paddy land meets the wet-paddy land definition (OECD, 2015[1]).
← 10. Decree No. 35/2015/ND-CP on the management and use of land for rice cultivation. Along with payment increases, Decree No. 35 also introduced both a per hectare payment for reclaiming land for rice production and penalties if growers convert paddy fields to non-agricultural uses.
← 11. Decree No. 62/2019/ND-CP which also revised the registration procedure that applies when paddy land is converted from rice to another crop.
← 12. Resolution No. 55/2010/QH12 of the National Assembly on agricultural land use tax exemption and reduction, amended and supplemented by Resolution No. 28/2016/QH14 of the National Assembly.
← 13. National Adaptation Plans were established in 2010 as part of the Cancún Adaptation Framework to enhance urgent action on adaptation and were adopted by Parties to the United Nations Framework Convention on Climate Change (UNFCCC) (Decision 1/CP.16.). NAPs enable countries to identify, prioritise and implement the most needed medium–and long–term adaptation actions.
← 14. Decree No. 107/2018/ND-CP replaced and repealed Decree No. 109/2010/ND-CP on rice export businesses.
← 15. Prior to 2018 traders were required to own warehouses that can hold at least 5 000 tonnes of rice and mills that can process at least 10 tonnes per hour, and maintain rice reserves equivalent to 10% of the volume exported in the preceding six months.
← 16. The 11 countries that signed the CPTPP are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Viet Nam.
← 17. The original NDC 8% reduction commitment used 2010 as the base year for estimating the 2030 BAU; the revised commitment used 2014 as the base year.
← 18. Decision No. 891/QD-BNN-KHCN dated 17 March 2020.
← 19. See https://www.ifad.org/en/web/latest/-/bringing-the-benefits-of-agricultural-insurance-to-smallholders-in-viet-nam.
← 20. Decision No. 156/QD-BNN-KHCH dated 11 January 2021 setting out MARD’s plan for implementing the Prime Minister’s Decision No. 1055/QD-TTg dated 20 July 2020 approving the National climate change adaptation plan for 2021-2030 with a vision to 2050.
← 21. Decree No. 41/2020/ND-CP extending tax and land rent payment deadlines was extended by Decree No. 52/2021/ND-CP.
← 22. Resolution No. 42/2020/ND-Ttg dated 9 April 2020 on measures to support people coping with difficulty during the COVID-19 pandemic. Decision No. 15/2020/QD-TTg dated 24 April 2020 on the implementation of policies to support people facing difficulties due to the COVID-19 pandemic. Resolution No. 154/NQ-CP dated 19 October 2020 amending and supplementing Resolution No. 42/NQ-CP dated 9 April 2020 on measures to support people facing difficulties due to the COVID-19 pandemic. Decision No. 32/2020/QD-TTg dated 19 October 2020 amending and supplementing a number of articles of Decision No. 15/2020/QD-TTg dated 24 April 2020 of the Prime Minister on policies to support people have been facing difficulties due to the COVID-19 pandemic.
← 23. Resolution No. 68/NQ-CP dated 1 July 2021 and thereafter, the amendments and supplements to Resolution No. 126/NQ-CP dated 8 October 2021.
← 24. Resolution No. 116/NQ-CP dated 24 September 2021 and Prime Minister's Decision No. 28 on policies to help employees and users.
← 25. Circular No. 01/2020/TT-NHNN issued on 13 March 2020, amended and supplemented by Circular No. 03/2021/TT-NHNN dated 2 April 2021 and Circular No. 14/2021/TT-NHNN dated 7 September 2021.
← 26. The nine other ASEAN countries are Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore and Thailand, with the other five being China, Japan, Korea, Australia and New Zealand.