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Accumulation and concentration of land to improve competitiveness towards a modern agriculture
1/8/2017 15:8' Send Print
Illustration. Image: taichinh online

Land limit - a "bottleneck" in agricultural development in Vietnam

The process of economic renovation including the reform of the land administration policy of the Party and the State of Vietnam has generated momentum and brought about great achievements in the development of agriculture and rural areas, ensuring food security, social stability, and acted as a supporting element while the world economy is changing. Vietnam has become one of the leading exporters of agricultural products, with 10 export items having value of more than US$1 billion. However, the area for production has reached limit, especially in terms of land and production methods. Vietnam has 9 million hectares of agricultural land with 10 million farmer households (2015), of which the average land area for agricultural production is only 0.46 ha per household, much lower than in other Asian countries.

According to the household survey for 1993-2013 of the General Statistic Office, the average area for agriculture, forestry and aquaculture for agricultural households increased slightly from 5,408 to 6,748 m2, mainly due to the increase of forest land area and water surface for aquaculture, while the average area under production per household decreased from 4,121 m2 to 3,334 m2. The prolonged common feature is agricultural land is small, fragmented, affecting labor productivity, added value and efficiency, wasting time and increasing intermediary costs, directly affecting income and the life of farmers. Although all people have land but incomes from land are not enough for them to live; a part of young, educated people must spontaneously leave the countryside to find jobs in cities or other countries; lack of labor and capital results in fallow land.

An alarming issue is that in recent years, the growth rate of average agricultural yield per hectare of arable land in Vietnam has decreased and is lower than in some other countries in the region. Average yield growth per hectare of cultivable land during 1986-1993 was 3.8% per annum, but for the period 2008-2013, it was only 1.7% per year. Decreasing income from agriculture, along with other revenue from land, is the main reason for farmers’ interest in agricultural production; they have even given up farming. The growing number of migrants to the city, largely untrained and unskilled has not yet received the necessary support for their wellbeing and faced many risks. Therefore, though leaving the village for many years, they still keep their land in case of instability and risks.

At present, Vietnam's economy has deeply integrated into the world economy. Apart from its relationship with multilateral trade organizations, such as the World Trade Organization (WTO), the Asia-Pacific Economic Cooperation (APEC), the Association of Southeast Asian Nations (ASEAN), we have been coordinated to implement new-generation free trade agreements; barriers to trade will be gradually removed, bringing about many opportunities and great challenges for agriculture. Vietnam's agricultural products have unfavouralely competed with the world's agricultural , between on the one hand large-scale, high-tech farms closely linked with reputable consortia, on the other hand small and spontaneous farmer households with many limitations and are inferior in productivity, quality and competitiveness. Prompted by the above issues, to develop modern agriculture, much remains to be done, including accumulation and concentration of land to take advantage of the scale and make the land an input of large-scale commodity production, application of science and technology, linking farmers to businesses and service development, dramatically reducing labor force in agriculture, stabilizing agriculture, forming a team of professional farmers.

Subjects and mechanisms of accumulation and concentration of land

Stakeholders of land accumulation and concentration include households (farmer households), cooperatives, and businesses, of which the farmer households are an important stakeholder. In countries with modern agriculture, farmer households are still the key stakeholder. Agricultural production is different from industrial production and services; the targets of production are organisms; their biological characteristics require managers and producers to be able to adapt and control the production process of each plant, animal, plot of land, have nursing skills and high responsibility in administration, so the size of the land must be consistent with production administration. Small plots of land, inability to take advantage of land scale to ensure livelihood and land accumulation or even bigger acreage beyond administration ability will be ineffective.

For businesses, despite large-scale land accumulation, they still have to rely on farmer households. They cannot engage in biological production stages, thus must assign to households. Businesses mainly provide input and output services and in this linkage model there are two partners involving in the agricultural-business process on the same piece of land and allocating responsibilities and benefits under an agreed mechanism. This is the combination of concentration and dispersion. Thus, for the farmer households - the basic subject, in order to be effective it is necessary to determine the optimal scale. In reality, the optimal size depends on many factors in addition to biological characteristics. They are the availability of land fund, adequate income and possibility of reinvestment, in line with sectoral characteristics and products of cultivation, husbandry, aquaculture, afforestation and protection, with geography conditions: suburbs, delta, and mountain, with technological level, development in width and depth. According to the World Bank and the Institute of Strategy and Policy for Agriculture and Rural Development, rice farmers must have at least two hectares of land to overcome poverty, 3 hectares to reach the middle-income threshold.

In order to develop farmer households beside size of land, and the households’ administration capacity, it is essential to uphold the role of the cooperative to support production, business, and cost reduction. Cooperatives play a coordinating role in linking farmer households, providing input and output services with diversified activities such as supplying materials (seeds, fertilizers, pesticides, and production tools), sale of products, and acting as a focal point for linking households with businesses, credit institutions and local authorities, receiving state support to reduce transaction costs.

Reality shows that businesses play an important role in developing agriculture into a modern, large-scale production through linkage of production with some appropriate forms as follows:

First, link with the farmer households to form a large, specialized production of one variety for export. Business is an investor supplying seeds, fertilizers, plant protection chemicals, building, guiding and supervising quality required by export organizations, applying modern production and processing technologies, ensuring product sales, developing and implementing contracts in a transparent way. From 2013 to 2015, Binh Dien Fertilizer Joint Stock Company worked with 200 farmers producing rice for export; income of farmers was stable and increased by 30% compared to before; it is important to stabilize sale of agricultural products.

Second, farmers contribute capital to businesses in kinds, which are land use rights. Take an example, farmer households in three provinces of Son La, Dien Bien and Lai Chau contributed capital as land use rights to the Vietnam General Rubber Corporation; they get payment for their labor, and dividends. In theory, this proves to be a good mechanism that is beneficial for businesses and farmers in the first 3 years. However, it takes a long cycle of 5 years for rubber to yield; rubber latex has not been tested while production depends on soil conditions, climate, land market which has not taken shape. Therefore, the evaluation of land use rights is not accurate, so the business operation of the Corporation and the farmer investors are facing difficulties.

Third, business rent land from farmer households for production for export. This method has been implemented in some localities and achieved positive results: Businesses have improved business efficiency; farmers have earned income from land rent and labor. In Lam Dong province, many businesses rent land to grow flowers, vegetables and fruits for export. In Long An province, businesses rent 240ha of land to grow banana for export to Japan. In the provinces of Hung Yen, Ha Nam, Thai Binh, commune authorities are mobilizing land and signing contracts with businesses. Unlike the mechanism of capital contribution by land use rights, businesses which are renting land have been quite successful, thanks to contractual commitments, stable sale and strict quality management on the basis of organic farming (clean, food security assurance), geographical guidance to ensure interest harmony between businesses and farmer households; importers are reputable partners which ensure stable outlets.

The role of the State and the market

In order to accumulate and concentrate land for agricultural development in the direction of modernization, it is necessary to combine the roles of the State and the market. The State formulates strategies and plans on agricultural development for each region and each product on the basis of market research and provision of public services to farmer households and businesses such as market information, trade promotion, product marketing, legal support, infrastructure construction, and vocational training for farmers. To have market information, we need to renovate investment thinking, increase investment on demands, match production to market demands and in line with world consumption trends. Capitalizing on advantages of soil, climate and farming tradition, some Vietnamese agricultural products have yielded profits (seafood, vegetables, fruits, rice, coffee, rubber, pepper, tea) and been competitive. However, lack of research into markets has failed to turn these comparative advantages to competitive advantages. Lacking market information, most farmers have had difficulties in product sale and suffered losses when the market fluctuates, thus though they have had “bumper crops,” “their products devaluate”; spontaneous changes of plants, animals, destruction of forest, excavation and filling of land are quite common, causing great economic losses to farmers. This is not to mention lack of quality orientation and administration, food hygiene and safety standards, branding, prestige and trust building among customers.

To develop modern agriculture, improve competitiveness and efficiency, it is necessary to map out solutions to overcome these constraints with synchronous policies as follows:

First, on the basis of the socio-economic development strategy, it is necessary to complete planning, develop agriculture and build plans to capitalize on core products of Vietnam, which have potential and advantages, and conduct market research and forecast of market, and the trend of agricultural product consumption of the world.

Second, encourage the formation of land use right markets. Currently, our country does not have a market for land use rights. With the recognition of land use rights as property rights, the land will be "bought and sold," the transfer of land use rights is more convenient; negative phenomena such as corruption and conflicts of interests between investors, local administration and farmers will be removed. In addition, it is necessary to create a source of agricultural land supply; farmers who leave for cities to find jobs will have the opportunity to transfer their land use rights as capital; policies must be developed so that when they become city-dwellers they do not have to return to work as farmers. The development of industrial zones must be synchronized with the development of residential areas to include social housing, schools, markets, cultural houses, health stations for workers to settle down. Mechanism must be made available to encourage farmers to accumulate land for enrichment, learn to do business and large-scale production, and improve management capacity to increase the scale and form a source of demand for the land market.

Third, adopt policies to encourage investors to adapt to agricultural production (long cycle, risks, low profit margins, slow returns) with specific mechanism, such as expansion of rented land, land lease duration and land rents, aiming to ensure capital returns and business profits, and have separate mechanisms for hi-tech businesses.

Fourth, promulgate institutions to formulate and implement contracts, specify the responsibilities, obligations and interests of participating parties, ensure the proper use of land, fulfill finance obligation towards farmers who rent out their land rights and later the State, recruit laborers to work in businesses to become professional farmers, especially new generation farmers.

Fifth, support farmers, in addition to cooperatives, businesses should encourage the formation of industry associations to include households and businesses with interests relating to the value chain, protect the benefits of participating actors, and supplement some functions of the State and the market. This is essential trend of modern market. The role of the associations is to support development, act as bridge between farmer households, processing and exporting businesses, represent farmers and businesses in settling disputes in international trade against protection policy of importing countries, anti-dumping, and technical barriers, boost up trade promotion activities at the national level, set up collective marketing networks, protect brands, and support restructuring and technology transfer.


This article was published on Communist Review No 896 (June 2017)

Assoc. Prof. Nguyen Cuc, PhDAcademy of Politics Regional I