Agriculture Reference
In-Depth Information
8
Role of State-Owned Enterprises in Vietnam's
Rice Markets
DANG KIM SON AND TRAN CONG THANG
Unlike those in other Asian countries, the food marketing parastatals in Viet-
nam did not originate as institutional entities to implement dual agricultural
pricing policies in the country. The two major parastatals, one in the north
(VINAFOOD-1) and the other in the south (VINAFOOD-2), were set up fol-
lowing the centralized planning approach, giving them monopoly control over
all aspects of agricultural marketing. Farm prices and consumer prices were
simply government decisions, and government covered, through budget subsi-
dies, any losses that parastatals might have incurred. Although an empirical as-
sessment of VINAFOODs' performance, especially for the early years, could
not be conducted due to the lack of data, evidence suggests that SOEs in gen-
eral were plagued by inefficiencies. For example, Minot and Goletti (2000) re-
port that the fiscal deficit in Vietnam ballooned in 1985-86 because of reduc-
tions in Soviet assistance and the losses of SOEs. The adverse effect of central
pricing on production incentives was also manifested through farmers' resist-
ance in the Mekong Delta to cooperativization; and in the north, there was a
growing recognition that centralization was eroding farmers' incentives.
1
With mounting fiscal deficit, reduced flow of Soviet assistance, and stag-
nating rice production, it became clear by the mid-1980s that policies had to be
changed to jump-start the economy. In 1986, the government decided to initi-
ate more market-friendly policies through an announcement commonly known
as
Doi Moi
(renovation). A resolution under this policy was passed in 1988 that
allowed farm households to (1) buy, own, and sell all agricultural inputs, such
as machines, buffaloes, and other tools; (2) lease cooperative land for 10-15
years under different forms of contracts and bidding; and (3) market 40 percent
of the contracted output. By 1989, compulsory government purchase of farm
products was eliminated, and private traders were allowed to purchase directly
from the farmers (Pingali and Xuan 1992).
Although subsidies were reduced and the economy responded remarkably
to reforms, SOEs in food and other sectors continue to dominate in the country
1. Farmers in the Mekong Delta were independent before the unification in 1975.
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