Hội nhập vào Chuỗi giá trị toàn cầu: Trường hợp lúa gạo Việt Nam

INTEGRATION TO GLOBAL VALUE CHAIN: CASE OF VIETNAMESE RICE (Hội nhập vào Chuỗi giá trị toàn cầu: trường hợp lúa gạo Việt Nam). Ho Cao Viet1 1. INTRODUCTION Global value chains (GVCs) have become a dominant feature of today’s global economy. This growing process of international fragmentation of production, driven by technological progress, cost, access to resources and markets and trade policy reforms has challenged our conventional wisdom on how we look at and interpret trade and, in particular, the policies that we develop around it. Indeed, traditional measures of trade that record gross flows of goods and services each and every time they cross borders, alone, may lead to misguided decisions being taken (Nadim Ahmad, 2013). The world production of rice is 605 million tonnes of paddy per year, equal to 403 tonnes of milled rice. Half of this is grown in China (30%) and India (21%). Only 26.5 million ton is traded internationally. Four traditional main exporters are Thailand, Vietnam, India and Pakistan. Only four traditional main countries are responsible for three-quarters of the trade: Thailand is the biggest exporter at 38%, Vietnam is second at 15%, then the United States 12% and India 10% (Ir. Corné Van Doores, 2005). Most rice is imported within Asia or to Africa. The Middle East is the leading importer region, accounting for 35 percent of the total. European Union (EU) only needs to import flavoured rice and its purchases are increasing by 15% a year. 90% of the imported rice is brown or husked rice which is milled within the EU by large milling companies. 17% of the European rice is imported from India and Thailand (Ir. Corné Van Doores, 2005). The USDA estimates Vietnam to produce 45.2 million tons of paddy rice (around 28.25 million tons, basis milled) in 2014-15. It estimates Vietnam to export about 6.7 million tons of rice in 2015, up about 6% compared 2014. The added value of Vietnamese rice in domestic market is still low compared with in international market because of many key factors such as organizational structure and capacity of actors in domestic rice value chain. However, in Viet Nam, the issues with respect to the rice value-chain are complex and multi- faceted. The rice that is marketed is often of low quality, as a result of mixed varieties and poor milling technologies. The challenge for Viet Nam is thus to understand and, more importantly, prioritize the constraints facing the marketing system (Ho Cao Viet, 2015). 1 Lecturer & senior researcher. Faculty of Economics, Van Hien University (VHU). 2. OBJECTIVES The study will overview rice global value-chain and identify the issues of Vietnamese rice value chain in the context to integrate into world rice market. In order to fulfill these aims, the two main objectives will be raised as following: (i) The involved economic theories, concepts & definitions of global value-chain will be reviewed and analyzed; (ii) Analysis of Vietnamese and other country-cases rice value-chain will be conducted; (iii) Major policy implementation will be proposed for Vietnam. 3. METHODOLOGY OF RESEARCH The study will be applied methods as following: (i) Desk research is the main method that using for compile information and data of global value chain in rice exported countries, in which Vietnam is a core country; (ii) Economic analysis of Vietnamese rice value-chain will be fulfilled by method of value-chain analysis. 4. RESULTS & DISCUSSION 4.1 Theory approaches and overview of global value chain of agricultural products A global value chain (GVC) describes the full range of activities undertaken to bring a product or service from its conception to its end use and how these activities are distributed over geographic space and across international borders2. Multinationals (MNEs) play an important role in the development of GVCs through their decisions about where to source, what suppliers to use and what they will produce themselves3. The rise of China may be the most significant economic event of the current generation, and one that it is intimately linked to the rise of GVCs. It is not clear to what extent China’s rise was aided by the rise of GVCs, or vice-versa. But, there is no doubt that China plays a hugely important role in GVCs, especially those in Asia. China, as a huge and low-wage country, also epitomizes many of the fears in advanced countries related to the offshoring and outsourcing of activities (Aaron Sydor, 2013). Alyson C. Ma and Ari Van Assche4 in paper “China’s Role in Global Production Networks” explore in great detail how China is linked into Asian and global production networks, the role of China’s export processing zones and of foreign invested enterprises. The rising importance of GVCs is also shown in the growing role of intermediate inputs for exports (which they call Vertical Supplier 1) and the growing importance of one country 2Adapted from the definition of global value chains used by Global Value Chain Initiative at Duke University 3 Aaron Sydor (2013).Global Value Chains: Impacts and Implications Editor’s Overview. 4 Adapted from Aaron Sydor (2013). as a supplier of intermediate inputs that are then exported by a second country (Vertical Supplier 2) (Aaron Sydor, 2013). Since David Ricardo expressed his views in 1817, international trade theory has been governed by a belief in comparative advantage which loosely states that each participant in trade will specialize in producing that good in which it has comparative advantage. Comparative advantage under Ricardo is simply measured as a cost advantage, without being explicit as to the source of the advantage, although is generally interpreted and modeled as a difference in technology or geography (Aaron Sydor, 2013). Cited by report of World Bank (2005): The value chain methodology is a tradition developed from two strains of literature: the business literature on strategy and organization of Porter and the literature of global commodity chains promoted by Gereffi and developed in numerous studies in the late 1990s. The “value chain” is defined as “the full range of activities which are required to bring a product or service from conception, through the intermediary phases of production, delivery to final consumers, and final disposal after use”. Briefly, such analysis focuses on the interaction of actors along each step of the production system (from producer to consumer) as well as the linkages within each set of actors. Such an approach thus considers international trade relations as being part of a series of networks of producers, exporters, importers, and retailers, whereby knowledge and relationships are developed to gain access to markets and suppliers. Such a perspective means that the success of developing countries in value-adding their production lies in the ability of these countries to access these networks (Agrifood International Consulting, 2002). The role of governance is central to the literature on value chains; that is, who controls the power relationships within the chain. Two types of value chains have been identified in the literature. Producer-driven chains are those in which companies that produce the product control the networks within the chain. Producer-driven chains are most common in capital- and technology-intensive industries where high barriers to entry exist in production. Buyer- driven chains, by contrast, are controlled by groups that market the product. In the case of agriculture, there are instance of both types of governance structures, though increased consolidation in the retail sector has led to an increase in the power of retailers in food distribution. Such governance issues are of increasing importance in agriculture, given the greater emphasis on product differentiation, food safety, and product standards required in the competitive market environment (Agrifood International Consulting, 2002). 4.2 Description of value chain of rice in Vietnam Low added-value channel High added-value channel Agro-material Rice Middleman Global inputs farmers Collectors market Domestic Processors Foreign Added-value Exporters market Importers products market Domestic market International market Source: syntheses by author (2017). Figure 1. Vietnamese Rice in global value chain. The survey in MRD (2016) identified 5 separate channels of distribution for rice in the past decades as following: (i) The first channel is a localized channel whereby farmers bring paddy to a local miller for processing. The milled rice is either sold locally in the market or returned to the farmer for subsistence needs; (ii) The second channel, the farmer interacts directly or indirectly with collectors, or provincial food companies. The farmer will either sell paddy directly to an agent of the food company or to a private trader, who will sell the paddy to the agent. The agent will store the paddy and sell the to the provincial food company for processing. The provincial food company will produce whole rice, broken rice, and bran for two separate channels, the export market and domestic markets. Rice destined for export markets is sent to other provincial food companies, VINAFOOD 1 or 2, or directly to overseas markets, depending on market conditions and contractual obligations. Rice sold in domestic markets is sold to private wholesalers, who sell to consumers and to other processing units, which use rice in food and feed purposes; (iii) The third channel is the interaction between traders and provincial food companies. Farmers sell to private traders or wholesalers instead of provincial food company agents, who then sell directly to the provincial food companies themselves or to private companies for export. The distribution of rice by private and state companies into export is similar to that in the second channel. This third channel involves greater interaction with private entities throughout the chain (traders, wholesalers, and private millers); (iv) In the fourth channel, paddy is sold by farmers to private wholesalers and traders, who then sell to other traders for processing into brown and/or raw white rice. This rice is then sold to provincial companies and food companies in Ho Chi Minh City for further re-processing for export or for domestic consumption; (v) The final marketing channel is primarily for domestically-consumed rice. Farmers sell paddy to traders, who sell to wholesale traders. Wholesale traders sell paddy to millers that produce brown rice and raw white rice for food consumption and further reprocessing by wholesalers and other food companies. This channel is completely privatized, with little interaction with the state-owned provincial food companies or VINAFOOD. The overwhelming majority of rice for both domestic retail consumption and exports is sold to local assemblers and collectors, who contract with local mills for processing. Direct sales from farmers to millers are relatively small. Assemblers typically collect paddy from local farmers that are reasonable close to the assemblers (within 10 km). In the South, assemblers sell paddy directly to medium and large millers (Agrifood International Consulting, 2002 & Ho Cao Viet, 2016). Domestic rice market & value chain: - Rice production & producers: almost rice farmers are located in Mekong river delta of Vietnam, which contributed over 34 million tons of rice paddies and exported around 7 million metric tons of rice annually for Vietnamese economy (Ho Cao Viet, 2015). Rice area owned by farmer households is under 0.3 hectares (Ho Cao Viet, 2014) and are per laborer is relatively small at 3.7 persons per hectare (3.8 in China & 1.2 in Thailand, respectively). - The average yield of paddy is around 8.3 fresh paddy5 metric tons per hectare (6.56 ton dried paddy); production cost was at 2.6 million VND per ton; selling price was at 5.1 million VND per ton; gross return was around 42.8 million VND per ton; gross profit was 20.9 million per ton. (Ho Cao Viet & Le Van Gia Nho, 2016)6. Table 1. Analyze economic parameters at rice farmer level in MRD, 2014-2015. Item Million VND USD7 Selling price (per ton) 5.15 245.1 Gross return (per ha) 42.85 2,040.2 Total cost (per ha) 21.89 1,042.2 Gross profit (per ha) 20.96 998.0 Unit price (per ton) 2.63 125.2 Production (Ton/ha) 8.32 Cost/benefit ratio (%) 96.0 Source: Ho Cao Viet & Le Van Gia Nho (2016). - Cost price of production: 5 21% of humidity for fresh harvested paddy. 6 Ho Cao Viet & Le Van Gia Nho (2016). 7 21,000 VND/USD. Table 2. Analyze added value of rice cultivation in MRD, 2015. Item Million VND/ton USD/ton % 1. Intermediate costs (IC) 1.66 79.0 61.7 Rice varieties 0.24 11.4 Fertilizers & pesticides 1.33 62.9 Fuels 0.10 4.7 2. Added Value (AV) 1.03 48.9 38.3 Labor for soil preparation 0.18 8.3 Labor for other activities (applying 0.46 21.7 fertilizers, pesticides etc.) Labor for harvesting & transportation 0.32 15.0 Loan & depreciation 0.09 3.9 Total costs (TC=IC+AV) 2.69 127.9 100.0 Note: calculated on 1 ton of fresh paddy rice at exchange rate 21,000 VND/USD. Source: Ho Cao Viet & Le Van Gia Nho (2016) The added-value in domestic value chain of rice: Rice traders and millers in domestic market: Traders of rice are usually are involved in the trade of other goods and services, and also may be involved in other parts of the marketing chain as farmer/collectors, farmer/retailers, miller/collector/wholesalers or holesalers/retailers (Agrifood International Consulting, 2002). Table 3. Added value of middleman & millers in MRD, 2015. (Domestic consumption channel) Item Million VND/ton USD/ton % 1. Intermediate costs (IC) 5.12 243.8 85.7 Buy raw paddy 5.12 243.8 2. Added value (AV) 0.86 40.7 14.3 Package 0.11 5.4 Transportation & loading 0.21 10.0 Drying wet paddy & milling 0.50 23.9 Commission, communication, loan 0.031 1.5 Total costs (TC=IC+AV) 5.98 284.5 100.0 Note: calculated on 1 ton of fresh paddy rice at exchange rate 21,000 VND/USD. Source: Ho Cao Viet & Le Van Gia Nho (2016). Note: Price delivered at port no bagged. Source: Ho Cao Viet (2015). Figure 2. Fluctuation of rice price in domestic by grade, 2015. Vietnamese rice exporters: World Bank (2002) cited by Agrifood International Consulting (2002): Millers and State Owned Enterprises (SOEs) face numerous constraints in their operations. The most important shared constraint for both millers and SOEs relates to issues of quality, stemming from inefficiencies in marketing channels. Presently, most rice is “double-milled”, with large private millers and provincial food companies purchasing brown rice for milling rather than paddy. The processing process was not changed over many decades (Ho Cao Viet, 2015). The current marketing system (from farmers to traders to small mills for dehusking to traders and export mills) prevents adequate quality control and standardization in varieties milled because of the numerous actors involved in the chain. That why price of Vietnamese rice is always lower than that of Thai rice at same quality (Ho Cao Viet, 2015). This decentralized structure of the industry has been due to the evolution of the industry from a few large SOE exporting mills and a large domestic milling sector. With the liberalization of the export quota and export license system there are many medium size mills who are now involved in exporting. Due to their capacity constraints they prefer to obtain brown rice from smaller millers to cut down transportation costs and milling times. The current system will make it much more difficult for Viet Nam to reach its goals of exporting more high-quality rice as a means to add value to the sector. However, this inefficiency needs to be weighed against the rural employment effects generated from having a multitude of small, specialized mills in rural areas. Proposals made by the Government to increase the area of high-quality, pure rice varieties to 1 million ha will have little impact on raising export quality. Even if farmers are able to maintain quality in the field, there is no guarantee that assemblers, traders, or small millers will not mix varieties purchased from farmers (Ho Cao Viet, 2015). Greater integration between millers, SOEs, and farmers will be required to ensure higher quality of exported rice. The narrow of markets for export rice limits the Vietnamese rice sector to expand, maintain competition as well as volume of exports (loss its comparative advantage as Cambodia enters to rice market). Despite improvements in quality of exported rice, Viet Nam still mainly exports low-quality rice (Ho Cao Viet, 2015). Viet Nam has relied primarily on government-to-government contracts and sales to African, Asian, and Middle Eastern markets, without diversifying market. In addition, Viet Nam has relied on only a limited number of foreign distributors for its rice. The Vietnam Food Association (VFA) takes a passive role in promoting international market (Agrifood International Consulting, 2002). Table 4. Analyze added value of rice exporters in MRD, 2015. (Export channel) Item Million VND/ton USD/ton % 1. Intermediate cost (IC) 5.20 247.6 79.5 Buy raw paddy 5.20 247.6 2. Added Value (AV) 1.34 64.0 20.5 Package 0.51 24.3 Transporting & loading 0.20 9.5 Drying wet paddy & milling 0.39 18.3 Exporting fee 0.09 4.2 Management fee 0.16 7.6 Total costs (TC=IC+AV) 6.54 311.6 Note: calculated on 1 ton of fresh paddy rice at exchange rate 21,000 VND/USD. Source: Ho Cao Viet & Le Van Gia Nho (2016). Whole added-value of Vietnamese rice in different value chains: Table 5. Distribution of added-value by different channels. Unit: USD per ton Net Gross Added Added Cost/Benefit Channel IC added return value costs ratio (%) value Rice farmers – middleman & miller – domestic consumption Rice farmer 243.8 79.0 164.9 48.9 115.9 90.6 Middleman & miller 306.6 243.8 62.8 40.7 22.1 7.8 Rice farmers – rice enterprise – domestic consumption Rice farmer 247.6 79.0 168.7 48.9 119.7 93.6 Rice enterprise 319.2 247.6 71.6 64.0 7.7 2.5 Rice farmers – rice exporter – exportation Rice farmer 247.6 79.0 168.7 48.9 119.7 93.6 Exporter 323.0 247.6 75.4 48.7 26.7 9.0 Note: calculated on 1 ton of fresh paddy rice at exchange rate 21,000 VND/USD. Source: Ho Cao Viet & Le Van Gia Nho (2016). Table 6. Contribution of added value of different agents. Unit: USD per ton Added value Net added value Channel (USD) (%) (USD) (%) Rice farmers – middleman – domestic consumption Rice farmer 164.9 72.4 115.9 84.0 Middleman & miller 62.8 27.6 22.1 16.0 Total 227.7 100,0 138.0 100.0 Rice farmers – rice enterprise – domestic consumption Rice farmer 168.7 70.2 119.7 94.0 Rice enterprise 71.6 29.8 7.7 6.0 Total 240.3 100.0 127.4 100.0 Rice farmers – rice exporter – exportation Rice farmer 168.7 69.1 119.7 81.8 Rice exporter 75.4 30.9 26.7 18.2 Total 244.0 100.0 146.4 100.0 Source: Ho Cao Viet & Le Van Gia Nho (2016).