Agriculture Reference
In-Depth Information
(Irvin 1995; Plummer 1995). For instance, both VINAFOODs continue to en-
joy close to monopoly status in international trade, and their operation is facil-
itated through cheap credit, warehousing facilities, and tax exemptions, which
translate into hidden subsidies and can potentially hinder private market devel-
opment. Against this backdrop, this chapter examines the operational structure,
scope, and performance of VINAFOODs since the reforms that began in the
mid-1980s. The chapter is organized as follows. The next section offers a dis-
cussion on how rice markets responded to various reforms, which is followed
by a section that describes the role of the VINAFOOD-1 and VINAFOOD-2 in
rice marketing. The subsequent section critically examines the rationales of var-
ious government supports that these parastatals enjoy in rice marketing, the fifth
section lists the major issues of policy reforms, and the chapter concludes with
a summary and policy implications.
Reforms in the Rice Sector: The Policies and Their Impacts
In Vietnam, the rice sector plays a dominant role in generating rural employ-
ment, enhancing household welfare and the overall economic stability in the
country. According to data from the
Vietnam Living Standard Survey
(GSO
2000), more than 80 percent of Vietnamese farmers cultivate rice, and for the
majority of them, it is the main source of livelihood. Therefore, it was not a sur-
prise when the leaders decided to deviate from the central planning model in
the face of declining per capita rice production during the country's first 5-year
plan (1976-80), which was a failure in many ways. None of the 15 production
targets was met during the plan period, per capita rice production declined, and
there was farmer resistance to centralization of cooperative management.
The government's response was formulated in Decree 100 in 1981, which
deviated from the central planning model and provided farm households with
the option to sell part of their surplus in the open market. However, farmers were
still obligated to supply a prespecified share of production to the cooperatives
in exchange for various inputs, including irrigation, fertilizers, and pesticides.
Farmers responsibility was therefore to plant, care, and harvest the crop. The
policy created strong incentive for farmers and had immediate effects on rice
production, which jumped from just 11.6 million tons in 1980 to about 16 mil-
lion tons in 1987. Per capita food production grew from 273 kilograms in 1981
to 304 kilograms in 1985 (Minot and Goletti 2000).
However, the invigorating impact of Decree 100 was short lived because
of macroeconomic instability, decline in Soviet assistance, and poor perfor-
mance of the SOEs. Rice production stagnated as hyperinflation eroded the real
value of official rice prices, fiscal deficit skyrocketed, and the farmers were dis-
satisfied by successive increases in production quotas. Thus, in 1986 the gov-
ernment announced a new policy initiative, known as the
Doi Moi
(renovation),
