Anyone watching the statements of regional analysts in the middle of last month to get a sense of the future of Vietnamese rice exports would probably have come away somewhat confused.
Since the early 1990s, Vietnam has been the world’s second-largest rice exporter after Thailand. Last year, the communist country exported 5 million tonnes behind Thailand’s 10 million.
Thai officials have worried over the years that Vietnam could move into the top spot, and such anxieties resurfaced with a surge of Vietnamese exports this spring. Vietnamese rice exports for the first half of this year hit 3.8 million tonnes, up 56 per cent year-on-year.
Meanwhile, however, a top official at Vietnam’s Agriculture and Rural Development Ministry was warning that Vietnam might have no rice to export at all a decade from now. Nguyen Tri Ngoc, head of the ministry’s Cultivation Department, said too much rice paddy was being converted into housing projects and golf courses.
“If this situation continues uncontrolled, combined with the current rate of population growth, it will be hard to satisfy the demand for rice exports by 2020,” Ngoc said.
And deputies in Vietnam’s National Assembly, along with some economists, were arguing that the Vietnamese government-run export system was hurting average farmers and discouraging them from growing rice.
The critics said the Vietnam Food Association (VFA), which administers government-set quotas on rice exports, works to maximize the profits of rice-exporting businesses rather than farmers. They said it ensures that export contracts are signed when world prices are high but that purchases from farmers lock in low prices.
That situation, they said, is because the leaders of the association are themselves executives of rice-exporting companies.
“It is unfair and undemocratic,” National Assembly delegate Danh Ut said last week. Ut, who represents Kien Giang Province in the heart of Vietnam’s Mekong Delta rice basket, has been among the association’s harshest critics.
“The VFA should serve the interests of the whole country, including farmers, but they only serve the interests of the companies,” Ut said.
Whether or not the association is to blame, rice farmers in Vietnam have not benefited from periods of high prices over the past year and a half. In March last year after global experts predicted a worldwide rice shortage, Vietnam declared a halt to new export contracts.
International spot rice prices shot up 80 percent to US$1,100 per tonne. Rumors of shortages led to a weekend of panic buying by Vietnamese consumers, driving local prices up 200 percent.
But the profits from those price hikes went into traders’ pockets and as Vietnamese farmers increased their planting area and produced a bumper crop, prices fell to US$600 a tonne or less. By last autumn, many farmers said they had sold their crops at a loss.
This year, the government has pursued the opposite strategy, opening the floodgates to massive exports to the Philippines and elsewhere. At the National Assembly session, Vietnamese Trade and Industry Minister Vu Huy Hoang suggested the government might try to help farmers by buying excess crops as reserves.
But some experts said the entire system of government export quotas is outdated.
“The only reason to have quotas and export controls is that they think they’ll export so much that they won’t have enough left here to eat,” said economist Adam McCarty of Mekong Economics.
In the 1980s, McCarty said, smaller rice harvests and inadequate infrastructure sometimes led to local famines in mountainous districts even as the Mekong Delta was exporting rice at high profits.
McCarty said he thinks that today, much larger harvests and better infrastructure have minimized that risk and the association’s twin mission, to ensure both domestic food security and high export revenues, creates a confusing conflict of interest.
As for increasing Vietnamese harvests, Ut said he was skeptical that Vietnam could ever surpass Thailand.
“Their yields are higher than Vietnam’s,” Ut said. “Their quality is higher.”
If Vietnam wants to increase its harvests, senior economist Samarendu Mohanty of the International Rice Research Institute in Manila agreed, it should concentrate on improving yields rather than government intervention to increase rice paddy under cultivation.
“The market should decide where land goes,” Mohanty said. “The more important thing is to produce more rice in the limited land we have available.”
He recommended increased investment in irrigation and development of frost-tolerant and drought-tolerant rice strains.
But separating the government from economic decisions, whether about rice or otherwise, is not standard practice in Vietnam, McCarty said.
“The whole philosophy [in capitalist countries] is keep the bastards apart, keep the businessmen apart from the officials,” McCarty said.
By contrast, “in Vietnam, you have a consensus system where they sit around a table and work out what’s best. Mostly, they get it right, but it’s hard to say in many cases what’s best for Vietnam, and the power blocs always win,” he said.
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