Large-Scale Field Model:A Policy Implication for Viet Nam?

ANH H. LACentre for Analysis and Forecasting

Viet Nam Academy of Social Sciences

Virtual Institute Seminar on Trade and PovertyGeneva, September 8-10, 2014

Content

• The Large-Scale Field Model implementation:

Technical problems facing An Giang Plant Protection Joint Stock Company

• Policy design: technical issue

• Conclusions

Technical problems facing An Giang Plant Protection Joint Stock

Company (1)• Could not invest in building more milling

plants and warehouses because of their underuse (two crops per year) and lack of budget (only loans with market interest rates available).• Uneven rice quality due to lack of drying

facilities with same quality at harvest time while opportunity cost of building drying plants is too high.• Face broken commitment to deploy LSFM

when a outputs contract is unenforceable or any crop is affected by weather or natural disasters.

Technical problems facing An Giang Plant Protection Joint Stock

Company (2)

• Difficult to get bank loans for paddy seed or fertilizer purchase to supply to farmers because of contract breach risk from farmers (paddy sold to collectors with higher prices or poor crop)• Cannot predict the impact of climate

change and sea level rise on rice production• Underdeveloped agricultural insurance

instruments

Policy design: Technical issue

• Lack of competition in rice exports• Lack of investment in rice growers from

exporters• Habit of small-scale rice producers and

lack of mutual trust between enterprises and farmers, causes the breaking of the contract.

• No clear rules for handling cases of dispute

• 30% profit to rice farmers is not guaranteed

• Inherent conflict of interest in regulating rice exports

• Lack of rice farmers’ participation in policy-making

Conclusions

• LSFM cannot be expanded if farmers’ benefit is not guaranteed.

• Successful implementation of the LSFM would require some level of competition among Vietnamese rice exporters and hence access to the rice export quota.