By Mr. Kaustubh Joshi,Strategy, Mahyco
Last weekend, while travelling back from work, my eyes fell on a write-up shared by a prominent columnist on Vietnam’s attempt to cope with its agricultural problems. Similar to India, Vietnam’s economy is heavily dependent on agriculture and almost, 70% of Vietnamese derive their income from the sector. The article also spoke about significant improvements that agriculture in Vietnam witnessed, but the challenges severely outnumbered them.
For example in the last few years, Vietnam has undertaken measures to improve its agricultural productivity. The relaxation of state monopoly on rice production was one such step which made Vietnam world’s second largest exporter of rice. At around 7.8 mn hectares of harvested area, rice remains to be the most important crop for Vietnam.
Similarly, Vietnam continues to be one of the biggest exporters of cash crops such as rubber, coffee, pepper etc. As a large population depends on agriculture, these steps have also led to an impressive 2% rate of poverty reduction in the country. Agriculture contributes to almost 17% to Vietnam’s GDP and is a major source of employment for nearly half of Vietnam’s workforce. But are these achievements enough for a country like Vietnam which has an extremely productive land and is blessed with a bountiful endowment of natural resources? Through this post, I bring to the table some of the biggest concerns that stop Vietnam from realizing its agricultural potential...
Firstly, agriculture in Vietnam continues to be quantity driven and not quality driven. In an interview, Dr. Dang Kim Son, Former Director of the Institute of Policy and Strategy for Agriculture and Rural Development, Vietnam, said that the quality of crops is leading to a decline in the growth of agriculture in Vietnam. He said “Our agricultural products are good, but they are only good in quantity, not quality, so their competitiveness is low”. (Source hyperlinked)
He also shares that there is less diversity of agricultural products in Vietnam. When the world is innovating to raise its competency Vietnam lacks initiative in this area. Secondly, farmers in Vietnam are abandoning their farmlands and moving to the cities in search of better job opportunities. This migration is a result of low investment of Vietnamese government in agriculture. In addition, the rate of migration from cultivating crops to growing allied sectors such as fishery and animal husbandry has been very slow. Vietnam is dominated by very small farms. 35% of the farms are less than 0.2 hectares. 34% of farms are of 0.2–0.5 hectares. Thus a total of 70% of farms are of the size less than 0.5 hectares. This indicates that Vietnam needs to focus extensively on the structural changes within agriculture, something that Vietnam has not been able to develop.
Apart from limited initiative to innovate and restricted investment from Government, the agricultural policies in Vietnam also require recalculation. There is market price volatility in the region, and competition for investment with industries. There is high usage of fertilizers in the sector leading to environmental degradation and huge dependency on exports and hence reliability on world economies.
Apart from the challenges stated, in my opinion the biggest challenge in Vietnam agriculture is the lack of focus on bringing innovative solutions to the sector, at a time when the entire world is advancing with the implementation of technology and innovation actively. Vietnamese agriculture has traditionally relied mainly on human and animal labor and little on engine powered machines.
For an economy, so heavily dependent on agriculture, it is imperative that the focus shifts to innovative solutions for better use of resources, financial inclusion of farmers, increasing competitiveness and diversifying agricultural product portfolio.