Vietnam's Agrarian Reform, Rural Livelihood and Policy Issues

Vietnam’s Agrarian Reform, Rural Livelihood and Policy Issues Nguyen Do Anh Tuan

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Abstract

Vietnamese agrarian reforms were embedded into general economic reforms (Doi Moi), enabling the country’s transition toward a market economy. Since 1998, they were implemented incrementally together with complementary instruments such as agricultural market liberalization and new economic incentives. Major steps included disentangling socialist producer cooperatives and assigning land use rights to its former members, developing and adapting a national legal framework (Land Law), and enhancing tenure security through gender-balanced inheritable land certificates. In addition to promoting individualized rights, successive reforms have contributed to accelerating the agricultural transformation process by encouraging perennial crop and agroforestry systems (long-term leasehold), and allowing rural land rentals and land sales markets to re-emerge.

During the 1990s, combined reform efforts sped up agricultural growth and industrialization, thereby enhancing food security, and combating hunger and rural poverty. Individualized rights, liberalized product and input markets, and a new entrepreneurial spirit resulted in intensified irrigated rice production, agricultural diversification, and better food quality. Although reform achievements— accompanied by policy interventions such as export quotas - are tremendous in terms of improved nutritional status and rural livelihoods, more efficient farming and agrarian structures, challenges to consolidate reforms exist. These challenges include addressing a declining tendency of agricultural growth, investment shortage for agricultural technology innovation, poor integration between agriculture and industry, imbalanced rural-urban income and increasing rural inequality, poor quality of rural infrastructure, and weak capacity of rural institutions. Those challenges require comprehensive policies addressing together the issues of agriculture, farmers and rural development.

1 Director of Southern Office/Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD). Address: 6 Nguyen Cong Tru, Hanoi, Vietnam. Email: [email protected]. The views expressed in the paper are those of the author and do not necessarily reflect the views of IPSARD

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1. Agrarian Reform Process in Vietnam

By the mid-1980s, it became painfully clear that Vietnam’s system of collective agriculture was not working. In 1987, after several years of slow growth, food production actually declined by 4.4 percent and famine struck parts of the country. Making matters worse, inflation had risen from 92 percent in 1985 to 775 percent in 1986, making food more and more expensive for the country’s population of 60 million.

At the Sixth National Party Congress in December 1986, the Vietnamese Communist Party enacted a series of reforms that would ultimately transform Vietnam from a centrally planned economy to a market-oriented one. The reform process, known as Doi Moi, did not really take hold until 1988, but once the collectives were dismantled, land-use rights were assigned to farmers, agricultural markets were liberalized, and wider economic reforms were implemented. As a result, Vietnam’s economy took off. For about a decade starting in the early 1990s, the country’s gross domestic product (GDP) grew at an annual rate of 7.6 percent thanks in large part to the rapid increase in agricultural growth, which grew 4.9 percent annually between 1996 and 2000, when the growth rate reached an all-time high (Minot et al., 2006; Sephri and Akram-Lodhi, 2002).

The reforms unleashed a new entrepreneurial spirit in Vietnam, both in agriculture and in other sectors. Farmers intensified rice production, diversified into new crops such as coffee and cashews, and improved the quality of the food they produced. By stimulating agricultural and overall economic growth, the reforms helped reduce rural poverty, hunger, and malnutrition. In just five years—from 1993 to 1998—the share of people living in poverty fell by 21 percent. Among children younger than five, the rate of stunting—meaning a low height for age, a symptom of poor nutrition—declined from 53 to 33 percent during the same period (Fritzen, 2002).

1.1. Collective Agriculture in Vietnam: 1954-1988

When Vietnam achieved independence from France in 1954, the Geneva Accords divided it into two countries with opposing ideologies—the Democratic Republic of Vietnam in the north adopted a socialist ideology influenced by China and the Soviet Union, and the Republic of Vietnam in the south pursued a capitalist ideology influenced by the United States. Civil war soon followed.

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The rural economies of the two countries were very different. In North Vietnam’s collectivized agriculture, groups of households formed production brigades, which were responsible for meeting government quotas for agricultural production. In South Vietnam, agriculture was highly commercialized and more oriented to the export market, and tenant farmers or sharecroppers cultivated land owned by landlords (Do and Iyer, 2003; Watts, 1998).

Following reunification in 1975, the Vietnamese Communist Party attempted to extend its centrally planned system—in particular, its large-scale agricultural collectivization—to the whole country. In the south, however, collectivization did not take hold. By 1980, only 24.5 percent of farm households belonged to a collective, and in many cases, southern farms were collectives on paper only (Kerkvliet, 1995; Nguyen, T.M, 1995).

Moreover, collective agriculture was performing poorly. In 1976 and 1977, agricultural production contracted by 0.5 percent and 6.6 percent, respectively. The amount of grain available in the country was falling, forcing the government to increase grain imports sharply. Government procurement of food also dropped, as farmers sought to avoid the state procurement system and instead sold their output through informal private markets, where prices were reported to be 10 times higher (AkramLodhi, 2001; Chu, V.L. et al., 1992; Fforde and de Vylder, 1996; Nguyen, D.A.T., 2006).

By the early 1980s, Vietnam faced an economic crisis. Western and Chinese aid to the country was declining, government food procurements were falling, and a food crisis was emerging. The unpopular system of collective agriculture was on the verge of spontaneous breakdown (Fforde and de Vylder, 1996; Lang, 1985). The Vietnamese Communist Party responded by issuing Directive 100 on January 13, 1981. This directive allowed collectives to contract with individual households to produce a certain amount of agricultural goods and then sell any surplus they produced in the private market or to state trading agencies. In mid-1981, procurement prices of agricultural goods were increased to the same level as market prices.

At first, this partial reform seemed promising—agricultural growth reached 10.6 percent in 1982. Success, however, was short-lived. The reforms, designed to make collective agriculture more efficient, were not deep enough to give farmers real incentives to produce more. Agricultural growth started to slow in 1983 and became negative by 1987. Inflation rose sharply, reaching 775 percent in 3

1986. The gap between free market and official prices was 10 times or more. Per capita food production fell below the minimum needed level of 300 kilograms a year. People were going hungry again (Beresford and Fforde, 1996; Nguyen K.V., 1990; Nguyen, D.A.T, 2006).

1.2. Agrarian Reform: 1988-2000

Under the Doi Moi reform process adopted in December 1986, the collective agriculture system began to be dismantled. The reforms had sweeping goals: they sought to stabilize the economy, develop the private sector, increase and stabilize agricultural output, shift the focus of investment from heavy to light industry, focus on export-led growth, and attract foreign investment.

It was not until 1988, however, that the Communist Party issued Resolution 10, which shifted the focus of rural development from collectives to household production. Resolution 10 obliged the agricultural collectives to contract land to households for 15 years for annual crops and 40 years for perennial crops. Households were allowed to buy and sell animals, equipment, and machinery. They still had to meet production quotas, but the production amounts and prices were fixed for five years, giving households a degree of certainty that they had previously lacked. The private sector was allowed to engage in food marketing.

Further reforms followed. From 1987 to 1991, the government relinquished control over prices and opened markets for both domestic and international trade. In 1989, it sharply devalued the country’s currency, making Vietnamese exports much more competitive on international markets (Fforde and de Vylder, 1996; Sepehri and Akram-Lodhi, 2002).

The reforms unleashed a surge of entrepreneurship and productivity. Agricultural growth jumped, reaching 3.8 percent a year from 1989 to 1992. As the government retreated from controlling markets and prices, farm households had new incentives to produce more and sell their surpluses. Vietnam, which had imported more than 460,000 tons of food in 1987 and again in 1988 to meet shortfalls in national production, became the world’s third-largest exporter of rice in 1989, alleviating national food shortages and generating large amounts of foreign exchange for the country (Dang, K.S. et al. 2005; Nguyen, D.A.T, 2006).

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Success in agriculture became a key driver of overall economic growth. Inflation plummeted to 36 percent in 1989. Growth in the agricultural sector in turn increased demand for construction and services. Although Vietnam experienced cuts in foreign aid owing to the collapse of the Eastern European socialist system during 1990–91, economic growth in the country remained strong. By 1992, Vietnam had fully recovered from the shock caused by the collapse of the socialist system, and the economy’s growth rate climbed to 8.7 percent (Dollar, 1994).

Still, it was difficult for farmers to grow commercial crops such as coffee, rubber, cashew nut, and pepper, in large part because they still did not have complete, long-term rights to their land. Financial institutions refused to accept existing land-use rights as collateral, preventing households from acquiring loan funds for agricultural investment. And local governments still played a dominant role in deciding crop patterns for specific types of land, requiring most land to be used for food production and discouraging agricultural diversification and further commercialization. In addition, many rural households, especially poor and smallholding ones, had difficulty obtaining access to production technologies, inputs, and capital for production (Akram-Lodhi, 2001; Fforde and de Vylder, 1996). In 1993, Vietnam passed a Land Law that extended land tenure to 20 years for annual crops and 50 years for perennial crops such as coffee and rubber.

The period from 1993 to 2000 was the “golden age” of the market economy in Vietnam. The agricultural sector grew at 4.6 percent annually, and the nonagricultural sector grew by more than 8 percent, thanks in large part to heavy foreign investment in Vietnamese industries. Even during the Asian financial crisis during 1997–2001, Vietnam maintained strong economic performance and the agricultural growth averaged 3.9 percent per year (Sepehri and Akram-Lodhi, 2002; Nguyen, D.A.T, 2006).

1.3. Key Factors, Interactions and Outcomes

Land reform and decollectivization in Vietnam have been implemented as part of the state’s general economic reforms (Doi Moi). This reform process must be seen in the context of historical events that led to the division of the country in 1954, the Vietnam War, its reunification, and the collectivization of the whole country in the 1970s. After the war, weaknesses in the collective system became obvious. The economic and food crisis in the late 1970s led the Communist party to reconsider its economic 5

development models and it provided more incentives to individuals. The main purpose was to increase the efficiency of the socialist system rather than adopt a market system.

The momentum of partial economic reform was further strengthened by the Soviet perestroika and the economic crisis in the mid-1980s. The salient events during this period were the relocation of land to farmers’ households, decollectivization in 1988, and a series of market liberalization policies from the late 1980s onward. This process was gradual–not a big bang approach.

The second half of the 1990s witnessed the golden age of Vietnam’s economic growth with reforms in the regulatory and institutional framework of commodity and labor markets, and intensified international integration. This reform and growth period ended with the Asian financial crisis, leading the government to hesitate on providing further reform.

Agrarian reform can therefore not be separated from the overall Doi Moi in Vietnam, and it is necessary to add a stronger policy perspective to the common understanding of the reform process, which is characterized as bottom-up, path-dependent and crisis-driven (van Brabant, 1990; Fforde and de Vylder, 1996). Active policy measures along with market liberalization and international integration, which not only generated innovative ideas but also consolidated the reform process’ performance and outcomes, have become more important. In agriculture, land tenure reform and decollectivization started first at peasant households and local authorities implemented them in the 1960s and 1970s within the collective system. Though keeping strictly to the socialist ideologies and centrally planning, the state, under severe economic shortages, gradually accepted individual interests and formally illegal contract practices. When the upcoming food crisis threatened the survival of the central planning and collective system, the political leadership actively reviewed those local experiments and scaled them up into national policies.

In the 1990s, market liberalization was chosen to speed up economic growth and industrialization after a long period of hunger, poverty, and international isolation. Under this pressure, the state played a more active role in consolidating reform results and looking for new options. However, reform efforts in the 1990s focused more on nonagricultural sectors, as agriculture and rural development were still benefiting from the momentum brought about by the drastic reform of Resolution 10 in 1988.

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1.4. Impacts of the Agrarian Reform on Farmer Livelihood

Since the late 1980s, Vietnam’s economic reforms have generated powerful incentives to invest in agriculture. Agricultural growth peaked at an average of 4.9 percent per year during 1996–2000 (Figure 1), and this has been the foundation of the economic reform in Vietnam. Though agricultural share in total GDP has been declining, the sector has always been the foundation for the development of industry and service sectors in Vietnam.

Figure 1. GDP Growth by Sector since the Economic Reform in Vietnam

16 14 12 10

%

8 6 4 2

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

-2

1986

0

-4 Total

Agriculture

Industry

Service

Source: General Statistics Office of Vietnam, various years.

As a result of rapid agricultural growth, Vietnam has been able to shift from a subsistence-based economy to one of sound food security and become a strong exporter of agricultural products. This has laid a solid foundation for the smooth transition from a centrally planned economy to a market economy which is one of the critical changes that many of the former socialist countries in Eastern Europe and the USSR have failed to achieve. A fast pace of production growth over a rather long period has also created a pre-requisite for agriculture to support industrialization process. Particularly, food surplus has helped to keep low cost of living and correspondingly low real wage for labor transferred from agriculture to non-agricultural sector (Dang, K.S., 2009; Nguyen, D.A.T, 2006). On the other hand, the increase in per capita rice production provided people with enough to eat, thus increasing national food security. Later on, the growth of food production played an important role in 7

stabilizing food prices, increasing real wages, and creating opportunities for farmers to participate in more profitable, higher-value farming and nonfarm activities (Minot and Goletti, 2000).

Reforms have led to greater food security and better nutrition, partly by increasing the production of rice, by far the most important staple food in the Vietnamese diet. Rice is consumed by 99.9 percent of Vietnamese households and accounts for about 75 percent of the total caloric intake of a typical household. From 1980 to 1984, farmers saw their rice yields rise by about 32 percent in the North and 24 percent in the South as a result of Directive 100 and subsequent complementary reforms, followed by similar gains as rice yields increased from 3.2 to 4.9 tons per hectare between 1990 and 2006, as a result of Resolution 10 and other policy and economic changes (Pingali and Vo T.X, 1992).

Increased food production and higher incomes have led to more diversified diets, with measurable benefits for nutrition. Between 1993 and 1998, the rates of underweight in children younger than age five fell slowly, but rates of stunting in children dropped dramatically, from 53 to 33 percent (Fritzen, 2002). The economic changes launched by the Doi Moi reforms also pulled many Vietnamese out of poverty. From 1993 to 2002, the incidence of poverty in Vietnam fell from 58 to 29 percent (World Bank, 2003). The number of people living in absolute poverty (however it is defined) is still high, but the poverty that persists today reflects the fact that some households still have poor access to land or have access only to poor-quality land.

During the 1990s, rice prices increased substantially. Nearly three-quarters of Vietnamese households both produced and consumed rice, but households that produced more rice than they consumed benefited from the higher prices. On average, higher rice prices thus helped households in rural areas, where most of the poor live, at the expense of households in urban areas (Minot and Goletti, 2000).

2. Policy Issues for Vietnam’s Agriculture and Rural Development in the New Millennium

Since 2001, Vietnam’s agricultural growth has been continuing at 3.7 percent per annum despite a difficult external environment of low commodity prices on world markets. Food per capita increased from 420 kg in 2001 to 470 kg in 2007, ensuring national food security and enabling more than 4 8

million tons of rice export every year. Agricultural diversification and commercialization aggressively took place. Many cash crops such as coffee, rubber, black pepper, and cashew nut have gradually occupied important positions in the international market. The export turnover of agricultural, forestry, and fishery products during the period of 2001–07 was $US49.6 billion, gaining an annual growth of 16.8 percent. Vietnam has become the second largest coffee exporter and the first largest exporter of Robusta coffee since 2000. Within a decade from 1995, coffee production increased by three times, and Vietnam gained more than US$1 billion from coffee exports in 2007. Similarly, Vietnam has become the biggest exporter of cashew nut and pepper, accounting for more than 50 percent of world exports since 2003–04.

Figure 2. GDP Growth Index in the Agricultural Sector 1985 -2006 (1985=1)

Source: General Statistics Office of Vietnam, various years.

In the new millennium, benefits from high economic growth again established a sound base for the state to reconsider its new urban-bias development strategies. Declining agricultural growth, widening rural–urban income gaps, and decreasing rural social stability became major factors contributing to the new tendency toward balancing intersectoral growth and integrating agricultural and rural development into the high-speed process of industrialization, modernization, and international integration (World Bank, 2008; Dang K.S., 2009).

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2. 1. Declining Agricultural Growth and Low Efficiency

Though agricultural growth has been high after the economic reform, its sustainability and efficiency is being under big questions. The growth of agriculture in Viet Nam over the last 20 years was the result of a combination of institutional factors such as new incentives to farmers recognized by Doi Moi as autonomous economic agents and physical factors such as land, labor, capital (mostly in the form of irrigation system), and intermediate inputs such as fertilizer.

Table 1. Agricultural Growth Accounting Estimation in Vietnam, 1986–2005

Period

Ag. GDP

Labor

Tractor

Pump

Fertilizer

Area of Annual Crop

Area of Perennial Crop

TFP

Growth (percent) 1986–90

2.7

2.5

-4.7

-1.2

-3.4

0.8

5.4

1991–95

4.7

6.9

28.6

25.6

13.4

2.0

7.8

1996–2000

4.9

1.3

10.5

10.3

4.0

2.7

9.8

2001–2005

3.7

1.0

5.7

4.4

1.4

1.0

3.0

8.0

1.7

6.3

1986–2005

3.8 2.7 10.5 9.8 Factors contributing to growth, based on their elasticities (percent) 1986–90

2.7

0.8

-0.2

-0.1

-0.5

0.3

0.2

2.0

1991–95

4.7

2.2

0.9

1.4

1.8

0.8

0.4

-2.8

1996–2000

4.9

0.4

0.3

0.6

0.5

1.1

0.4

1.5

2001–2005

3.7

0.3

0.2

0.2

0.2

0.4

0.1

2.2

3.8 0.9 0.3 0.5 Percent of factors contributing to 1 percent agricultural growth

1.1

0.7

0.3

0.0

1986–2005 1986–90

100.0

29.9

-5.9

-2.4

-17.1

12.4

9.2

73.9

1991–95

100.0

47.5

19.9

29.4

37.9

17.6

7.4

-59.7

1996–2000

100.0

8.9

7.0

11.4

10.9

22.3

9.1

30.3

2001–2005

100.0

8.5

5.1

6.5

5.2

11.4

3.7

59.5

1986–2005

100.0

23.2

9.1

14.0

28.3

18.2

7.5

-0.3

32.5

3.3

5.4

13.4

40.9

4.5

Elasticities (percent)

Note: TFP is the residual of agricultural growth minus sum of factor growth weighted by elasticities. Source: Nguyen, D.A.T. 2008.

Over the 20 years of Doi Moi, investment in agricultural inputs (best illustrated by volume of fertilizers) and labor has played the most important role, contributing 23.2 and 28.3 percent respectively to the overall growth of agriculture. Increased acreage of crops has brought about 25 percent of the growth of the sector (see Table 1), which has been significantly enhaced by large investment in irrigation system by the government.

Yet, the growth accounting framework shows that technology innovation made just modest contribution to agricultural growth. Role of investment in production modernization (indicated by the 10

increase in number of machinery) and science-technology development (indicated by growth of total factor productivity - TFP) has not been very significant in contributing to agricultural growth over the last 20 years (9.1 percent from tractors, 14 percent from pumps and -0.3 percent from TFP). This shows that the contribution of mechanization, labor productivity and product quality to agricultural growth remains very limited.

Figure 3. Mean Technical Efficiency Change, Technical Change and Total Factor Productivity (TFP) Change in Agriculture, 1980-2000

0.12 0.1 0.08 0.06 Technical change

0.04

Efficiency change

0.02

on

es

ia

nd In d

ai la

Th

M

al

ay

ine

sia

s

ia

il li p

In d

ar nm ya

ia

na m M

Ph

-0.04

Vi et

Au

-0.02

st ra l

Ch in

a

0

Source: Coelli and Rao (2003), adopted from Spielman and Kelemework (2008)

Figure 3 adopted from Coellie and Rao (2003) bolsters the above arguments by showing factors contributing to TFP growth during 1980-2000 in selected countries. Compared to other countries, TFP growth of Vietnam’s agriculture is at medium level, but this is totally contributed by efficiency change rather than technical change (recorded as negative). This reflect the nature of TFP growth in Vietnam’s agriculture, in which farmers have been utilizing resources more efficiently within their own production boundary, rather than taking new technologies to move up the production frontier.

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Figure 4: Recent Trend of Declining Agricultural Growth

Source: Dang, K.S., 2009.

Stagnation of agricultural innovation has threatened performance of agricultural growth recently (see Figure 4). Following a period of rapid growth, the sector has started to slow down remarkably. The growth of agricultural GDP has fallen from 4.9 percent 1996-2000 to 3.7 percent 2001-2005, to 2.8 percent in 2006 and to only 2.3 percent in 2007. Meanwhile, contribution by inputs has declined remarkably. Much of the young and strong labor force has been withdrawn from rural areas; agricultural land has shrunk; the use of fertilizers has increased while fertilizer costs have also gone up and there has been little progress in addressing such constraints as land fragmentation and capital shortage that discourage farmers to invest in farming machinery. As a result, technology innovation will be the major force for further agricultural growth in the future.

In the long run, in order to sustain agricultural growth, it is necessary to develop a new policy system. Labor will continue to decline and land be limited. To promote further contribution of machinery and equipment there needs to be a way to expand household-level production scale and at the same time build farmers’ capacity to invest more in these facilities. Science and technology is seen as the only sustainable and expandable means to achieve this into the future. Such a means is a joint result of various activities including scientific research, agricultural extension, skilled labor, acquisition of

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international science and technological developments and application of new equipment and technologies by farmers and agrifood business sector.

2.2. Poor Integration between Agriculture and Industry

Since the Doi Moi, Vietnam’s industrial sector accelerated at very high speed with 2-digit growth rate. Key industrial products included automobiles, motorbikes and electronic appliances which were strongly invested in by foreign investors and protected by the government. However the production of agricultural machinery and inputs was left unattended. By the late 1990s, industrial factories were still concentrated in urban areas. Only 28.3percent of them were located in rural areas (chemicals: 2.1%, electricity: 6.8%, mechanical engineering: 12.8%, light industry: 14.9%, construction materials: 30.9%, agricultural processing: 32.5%, paper: 45%). In recent years, industrial parks have been developed in many provinces around Ho Chi Minh City and Hanoi occupying much fertile and irrigated land. However, none of these provinces has been able to create enough jobs for local laborers, consume or process industrial materials, supply inputs and equipment for agricultural production and meet the needs of the rural population.

There was only one agricultural machinery manufacturer supplying only 25% of the domestic 2

demand. Industrial products from China, Russia, Japan and the US dominated the rural areas, ranging from fans, fabric, pottery, thermos, electrical pumps, parabolic antennas, water pumps, motorcycles and electricity generators to small vehicles, small buses and agricultural machinery. As of 2003, nearly 93% of urea fertilizer supply was imported. The Phu My Urea Fertilizer plant which became operational in 2004 is only able to meet 30-35% of the domestic demand. Much of the supply of pesticide, veterinary drugs and seedlings is still imported. As of 2000, only 12% of the total fruit output, 8% vegetables, 13% pork and 6% forestry products were processed.

2.3. Farmer Livelihood Improved, but Rural-Urban Gap and Inequality Remained

Along with high economic growth in the new millennium, Vietnam has achieved good performance in income improvement and poverty reduction. Income per capita was mostly doubled both in urban and rural areas during 2002-2006. Meanwhile, poverty rate reduced significantly from 29 percent in 2002 to 16 percent in 2006. 2

Chinese machinery accounted for 45% and imported second-hand machinery, 28% of the market.

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Yet, the income of rural people is low while that of the urban population has increased rapidly in recent years. Consequently, it is becoming more difficult to narrow the income gap. The Vietnam Household Living Standard Survey (VHLSS) show that the average monthly income per capita in urban areas was 2.3 times that in rural areas in 2002, 2.2 times in 2004 and 2.1 times in 2006. In rural areas themselves, the gap between the rich and the poor is also widening. It was six-fold in 2002, 6.4 times in 2004 and 6.5 times in 2006.

VND Thousand

Figure 5: Average Monthly Income per Capita

1200

2002

1000

2004 2006

800 600 400 200 0 Urban

Rural

Source: Vietnam Household Living Standard Surveys.

An important, yet less visible, difference is access to opportunities. People in rural areas are more disadvantaged because of limited or no access to information and market, consequently, less opportunity to finding an appropriate and well-paid job or to advancing their education. As a rule of thumb, when land, labour and capital are all expensive in urban areas and cheap in rural ones, transfer of resources will take place from the latter to the former. Villages on the edge of cities quickly become urban and fertile agricultural land with well-organized irrigation systems is converted for industrial purposes. Young and educated people move to urban areas to work and live. The society’s wealth, foreign capital and accumulated savings in rural areas are all transferred to urban areas. As a

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result, poverty reduction is faster in urban areas than in rural ones, and most of the poor are living in rural areas.

Figure 6: Poverty Rate by Region

70 Urban 60

Rural

50

%

40 30 20 10 0 1993

1998

2002

2004

2006

Source: Vietnam Household Living Standard Surveys.

When the share of family income from agricultural production dramatically dropped from 58% in 1993 to 43% in 2004, leaving home villages and moving to work in the cities or overseas appeared to be the best solution. Most of the migrant workers from rural areas are undertaking “informal” jobs in urban areas and the target of many policies that aimed to protect the interest of urban residents (e.g. permanent residence registration; banning of cyclos, manual vehicles, use of loudspeakers to sell things and street vending). Many found formal employment in factories and for businesses but have also had to suffer other types of discrimination. According to a survey conducted by the GSO and UNFPA in Ho Chi Minh City and industrial parks in the South East, migrant workers were paid 30% less than local workers and female migrant workers found it more difficult to find jobs than male migrant workers and in some cases were paid 23% less. For example, they were less protected by trade unions and had to accept working overtime and in hazardous conditions. A common disadvantage between informal and formal workers was that they both had difficult and dangerous living conditions. They had problems travelling home for Tet (new year) holidays each year. Those whose families migrated with them also had difficulty in accessing education and health services. Overseas migrant workers and rural women leaving the country to marry foreign men were all exposed to various types of risks due to lack of information and brokerage frauds. 15

2.4. Better Access to Rural Infrastructure, but with Low Quality

Comparing to the pre-reform period 20 years ago, the rural situation has been improved dramatically. However there remains unequal access to national benefits and opportunities. 2006 statistics show that 94.2% of the country’s households had access to electricity and 74% to clean water; 96.9% of the communes had road access to commune centers and 94.4% had telephone lines. However the quality of these services was far lower compared to urban areas. According to GSO 2006 data, 21% of rural enterprises reported that rural transport systems were very poor (compared to 13% of urban enterprises) and 8% complained about the quality of telephone services (compared to 0% of urban enterprises). Also there were road systems in place but not accessible to tracks and electricity was only used for household lighting and not for production activities.

Statistics about other rural services may also be misleading. For example, as of 2006, 88.3% of the communes had kindergartens, 99.3% primary schools, 99.3% health clinics, 88.5% post offices cum cultural centers; 58.8% markets, 78.7% agro-forestry-fisheries extension workers and 83.6% veterinary workers. However, these figures do not indicate the level of quality of these services. An enterprise survey done in 2006 shows that 9% of rural enterprises were not satisfied with the quality of rural education and training systems available (compared to 1% of urban enterprises) and considered the quality of rural vocational training to be only half as good as that of urban areas.

2.5. Weak Farmer Associations and Cooperative Economy

By 2006, there were 7,237 cooperatives nationwide, most of which were old-style cooperatives that had been transformed and concentrated in the North and employed 5% of the total labor force in the agro-forestry-fisheries sector. Despite Party and Government support, the role of cooperatives remains insignificant. The size of an average cooperative is equivalent to just 4% of an agro-forestryfisheries enterprise. Surges in agricultural input prices and declines in agricultural product prices regularly pose a threat to the 14 million small rural households who are not able to act collaboratively and do not have the capabilities to negotiate, lodge complaints or settle disputes. At the same time farmer unions are very weak at the grassroots level and only operate in an administrative manner at the central level. According to a CIVICUS survey conducted in 2005, the impact of the Farmers’ Union on rural life ranks third out of four, which clearly shows that it has not really become an organization 16

supported by farmers, effectively acting in their interest. Although rural residents account for 70% of the total population they are yet to play an important role in socio-economic life and in the policy making process.

3. Toward a Strategic Orientation for Agriculture and Rural Development in Vietnam

Since the economic reform, Vietnam has been undertaking and will have to make transformations that many other countries have taken hundreds of years to achieve. Specifically this is the process of transformation from a centrally planned economy to a market economy, from being broadly agriculture-based to industrializing production, from a rural to an urbanized society and from a closed to a global market. Such a rapidly evolving process requires a certain level of government intervention and budget expansion to close the gaps and address market failures in order to strike a balance between economic growth and environmental sustainability and between rapid urban development and rural stagnation.

It is the rural residents who will be the subject of this great development. They need to be proactive in managing and implementing the development process. The issues of agriculture farmers and rural development should be tackled coherently and holistically in the context of national development. The various economic stakeholders, urban and industrial sectors need to support and associate with the agriculture sector and farmers. The power of S&T and market mechanisms should be utilized to realize the potential of resources such as land, labour, forests and seas.

Agriculture, farmers and rural areas thus play an important part in the economy and society and contribute significantly to economic growth, political stability and national development throughout the socialist-oriented process of industrialization and urbanization in Vietnam. Agriculture helps to ensure national food security. The rural economy, once developed, will create jobs and income for the majority of the population and generate inflows of foreign exchange. Farmers who are adequately employed and have income will help reduce poverty and build social justice and stability. Rural areas are also places where a healthy cultural environment is preserved and enhanced. 17

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