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Overview of Vietnam’s agriculture sector

Overview of Vietnam’s agriculture sector

Thursday 03, 11 2022
It is believed that theres still exist several problems in Vietnam's agriculture sector, which makes it impossible to be a big driver for the growth of the whole economy.

Vietnam's agriculture industry over the past two decades

By promoting intensive farming, focusing on increasing rice productivity to eliminate hunger and reduce poverty, and to ensure food security and social stability, Vietnam has become one of the countries with high per capita food production among middle-income countries. Exports have also boomed. Currently Vietnam is one of the largest exporters of rice, coffee, cashew, pepper and aquatic products in the world.

Although the share of agriculture in the country's GDP has decreased in recent years, its contribution to economic growth has remained stable at 16-18%. The industry still plays a very important role when creating over 40% of the total jobs for the country's labor force.

Features of Vietnam's agriculture

Rice is still the most important crop

In the period 1990-2015, the arable land area increased by 2% per year on average. By the end of 2015, it had reached nearly 15 million hectares. During the same period, area of land for rice cultivation grew more slowly, averaging 1% per year, with little change since 2000.

According to the latest statistics, the area of rice cultivation is now at 7.8 million hectares, accounting for 52.5% of the total arable land. Moreover, productivity has improved a lot compared to 20 years ago. It should be emphasized that, in order to achieve the goals of food security and poverty alleviation, rice has received the Government's favor when the delta agricultural land that is of the best quality accompanied by a special irrigation system is always devoted to rice cultivation.

Vietnamcredit Rice is still the most important crop

For many years, much of the Government's efforts to expand irrigation, research and extension have focused on increasing local and national rice production.

Crop diversification has just begun

From 1990 to 2014, the process of crop diversification in Vietnam took place quite slowly and the structure did not change significantly. The area of grain increased by 39% (mainly maize and cassava) and still accounts for over 70% of total cultivated land.

Meanwhile, fruits and vegetables with a low starting point increased by 94% and 215%, respectively, but still contribute a very low proportion. This can be explained by the priority of developing rice and the fragmentation of agricultural land ownership.

Fragmentation of land holdings is a huge problem

According to the Agricultural Census statistics, about 90% of agricultural land belongs to agricultural households and farms, 6% belongs to enterprises and the rest belongs to other establishments. Most of the agricultural households are very small in scale. In particular, the proportion of households cultivating fields under 0.5 hectares is 69%, while those with an area of 0.5 to 2 hectares account for 25% and the group with an area larger than 2 hectares account for only 6%.

Vietnamcredit Agricultural Census statistics

The degree of fragmentation varies greatly among regions, with the Red River Delta and the Northern Midlands and Mountains having the highest fragmentation. Thus, the average farming area per Vietnamese agricultural worker is at 0.34 hectares, only equal to 0.6 to 0.8 times of other countries in the region such as Cambodia, Myanmar and the Philippines.

Unsustainable development model

So far, Vietnam's national food security strategy has brought outstanding achievements in productivity, output and export, but achievements in economic efficiency for farmers and contribution to the building of a national agricultural product brand are not very impressive.

Vietnam's agricultural growth is based on a model of quantity rather than quality, which means that intensive farming leads to excessive use of fertilizers, pesticides and chemicals leading to high direct costs and indirect costs to the environment.

In the period 2005 - 2016, Vietnam's agriculture industry was estimated to grow by 36.8%, however, the import of agricultural materials increased far beyond this level. Specifically, fertilizer imports increased by 43%, and imports of pesticide & chemical raw materials increased by 337%.

Vietnamcredit Vietnam development report

In its Vietnam development report, WorldBank pointed out that the growth rate of total factor productivity (TFP) in Vietnam's Agriculture sector has been on a downward trend since 2000. This is clearly worrying. According to another IPSARD statistic, TFP accounts for an average of 40% of Vietnam's agricultural growth in recent years, while that of Thailand is 83%, China is 86% and Malaysia is 92%.

Vietnamese agricultural products are labeled as cheap in the international market

In fact, for many years, Vietnam's agricultural exports have been sold at lower prices than other countries in the region, mainly because of poor quality.

The most important cause, besides farming techniques, varieties and excessive abuse of chemicals and materials, is the underdevelopment of the post-harvest preservation and processing stages in order to bring higher product value. This leads to some agricultural products of Vietnam having to depend on some "easygoing" markets that want buy large quantities at low prices like China.

Source: BVSC

Compiled by VietnamCredit

 

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