THE STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING BANKING ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL BUSINESS --------- TRỊNH MINH THÔNG Student Code: 18A4050224 AN INVESTIGATION INTO THE GLOBAL RICE SECTOR VALUE CHAIN IN VIETNAM GRADUATION THESIS Hanoi, May 2019 THE STATE BANK OF VIETNAM MINISTRY OF EDUCATION AND TRAINING BANKING ACADEMY OF VIETNAM FACULTY OF INTERNATIONAL BUSINESS --------- TRỊNH MINH THÔNG Student Code: 18A4050224 AN INVESTIGATION INTO THE GLOBAL RICE SECTOR VALUE CHAIN IN VIETNAM Major: International Business Code: 734.20 GRADUATION THESIS Lecture: MS.C Vũ Thị Kim Chi Hanoi, May 2019 i DECLARATION I promise that this is my own research. The data and results stated in the thesis are honest and never published in other works. Unless stated above, I take full responsibility for my topic. ii ACKNOWLEDGMENTS The graduation thesis is considered to be an important component of the bachelor’s degree program at the Banking Academy of Vietnam to help the students compare the theory they have learned at the university with outside practice.
A completed study would not be done without any assistance. Therefore, I gratefully give acknowledgment to my support and motivation during the time of doing this research. My topic of graduation thesis is about “An Investigation into the Global Rice Sector Value Chain in Vietnam.” I would like to thank my lecture MS.c Vũ Thị Kim Chi has shared, advised and helped me a lot during my research and completed the graduation thesis. Her encouragement and comments had significantly enriched and improved my work.
The thesis would not have been effectively done without her instruction. This graduation thesis will inevitably be in error due to limited knowledge, so I hope to receive the comments of teachers to complete the research. iii TABLE OF CONTENTS CHAPTER 1: INTRODUCTION. The rationale of the research.
Prior researches on global value chains. Research gaps and problems. Structure of the thesis .6 CHAPTER 2: LITERATURE REVIEW. An overview of the global value chain.
A brief history of “global value chain. Definitions of the global value chain. Global value chain in the concept of Kaplinsky and Morris. Global value chain in the concept of Michael Porter.
Classification of the global value chain. Producer - driven global value chain. Buyer-driven global value chain. Forms of participation in global value chains.
Categorized by the form of chain management. Categorized by commodities participating in GVC. Categorized by the capacity to participate in GVC. Benefits when participating in GVC.
The global value chain of agricultural products. Definitions of the global agricultural value chain. Characteristics of global agricultural chains. Agricultural value chain models.
20 CONCLUSION OF CHAPTER 2 .24 CHAPTER 3: METHODOLOGY AND ANALYSIS. An overview of agriculture in Vietnam. Rice production and productivity. The status quo of the participation of Vietnam agricultural products in GVC.
Acquisition and Processing. Evaluation of the participation in GVCs of Vietnamese rice products. Positioning the Vietnamese rice product in the global value chains. Reasons for the ineffective partcipation of rice in the global value chain .41 CONCLUSION OF CHAPTER 3 .44 CHAPTER 4: EXPERIENCE PARTICIPATING IN THE GLOBAL RICE VALUE CHAIN OF SOME COUNTRIES AND LESSONS FOR VIETNAM.
Lessons for Vietnam. SWOT analysis of Vietnamese rice products. For the government. For the farmers, agriculture cooperatives.
For the companies. Limitations and suggestions for future research. Suggestions for future research .61 CONCLUSION OF CHAPTER 4 .64 v LIST OF ACRONYMS Acronyms Meaning CPC Commune People's Committee EU European Union EVFTA European Union – Vietnam Free Trade Agreement FAO Food and Agriculture Organization of the United Nations G2G Government to government GCCs Global Commodity Chains GMP Good Manufacturing Practices GSO General Statistics Office of Vietnam GVC Global Value Chain HR Human Resource IPSARD Institute of Policy and Strategy for Agriculture and Rural Development MARD Ministry of Agriculture and Rural Development of Vietnam MOIT Ministry of Industry and Trade of Vietnam MRD Mekong River Delta OBM Original brand-name manufacturing ODM Original design manufacturing OECD Organization for Economic Co-operation and Development OEM Original equipment manufacturing R&D Research and Development SOEs State-owned enterprises TNCs Transnational corporations UNCTAD United Nations Conference on Trade and Development USA United States of America USD United States Dollar USDA United States Department of Agriculture VARHS Vietnam Access to Resources Household Survey VFA Vietnam Food Association WBCSD World Business Council for Sustainable Development vi LIST OF TABLE AND FIGURE Figure 1.1: Output and price of rice .2: Chain of production and distribution of rice .1: A standardized model for the sustainable value chain .2: Porter generic value chain .3: Producer – driven GVC diagram .4: Buyer – driven GVC diagram .5: Value chain model for agricultural products .7: Value chain of agricultural products managed by the retailers .8: Value chain of agricultural products managed by the suppliers .1: The production and cultivated area of Vietnam in the period of 2009-2018 .2: The exported quantity and value of Vietnam’s rice product .3: The market structure of domestic rice distribution .4: The proportion of exported rice under centralized contracts, .5: The main export rice of Vietnam in 2013 .6: Extended value chain after rice .1: The buyers of millers.1: Production and rice export value of India from 2000-2013 .2: SWOT model of the Vietnamese rice sector .1: The diagram of GVCs in Rice .1: India's rice value chain, 2012 .2: Thailand rice value chain 2004. The rationale of the research Vietnam’s growth within the past few decades is labeled as ‘one of the most marvelous in the developing world.
The economic achievements have turned the nation from one of the least developed throughout the world to a nation with lower middle- income status. Such success has been attributed to the fast development of the farming division in general and the rice subsector in specific. It is without a doubt that rice has played a vital role in the Vietnamese people’s lives. Rice has long been seen as the main staple of Vietnam, providing the most critical source of nutrition for the population.
Not only that, but rice cultivation is also the main accupation of many Vietnamese people. According to General Statistics of Vietnam statistics, in 2015, 44% of workers worked in the agricultural sector, most of them participated in rice cultivation. The rice sector is instrumental in providing a major source of income for many rural households in Vietnam. On a broader scale, rice is also an essential export commodity in Vietnam's portfolio of agricultural products, generating foreign exchange revenues for the country, especially in the 2000s.
In 2012, Vietnam's rice exports reached the highest level of 8.5 million tons and reached 3. However, the income derived from the rice industry is still meager compared to that from other agricultural sectors and compared to the average income of the whole country. On the other hand, in recent years, Vietnam's rice industry has faced severe environmental issues. While world food prices continue to grow slowly (Figure 1.1), climate change is making Vietnam's agricultural production more vulnerable, leading to a decline in rice production.
Additionally, Vietnam’s rice sector has been perceived as a supplier of low-quality rice by the global partners, resulting in an unfavorable stance in international markets. Meanwhile, Vietnam is entering an era of globalization and integration, from which Vietnam's agricultural sector is facing not only opportunities but also challenges from multilateral sides. The numerous free trade agreements, to which Vietnam is member, for example, the Agreement on Trade Freedom Vietnam - EU (EVFTA), will create desirable conditions for agricultural products in Vietnam to gain access to important markets in the world. However, these opportunities can only be realized if Vietnam's agricultural products satisfy quality standards and meet consumer preferences 2 in those developed markets.
This raises the need to renew the entire rice production process in order to meet the requirements of the aforementioned potential markets.1: Output and price of rice Source: (FAO, 2018) In response to the challenges posed by climate change and integration, the efforts of each farmer and each enterprise are not enough. It is essential that relevant government agencies review the system of policies, institutions, and activities of the market to devise and implement necessary reform measures. The challenge for Vietnam is hence, to comprehend the competitiveness and profitability of the industry and devise strategies to overcome relevant issues. These bottlenecks will be raised all through the course of the thesis.
This is an essential job to overcome challenges, improve the productivity of the rice industry and the income of rice farmers. It is a useful contribution to the implementation of the socio-economic development plan and the economic restructuring plan proposed by the Party and the State. Prior researches on global value chains There have been several research topics on the value chain of agricultural products and the global rice value chain. At the world level, there are some studies such as "Integration of Small Farmers into Global Value Chains: Challenges and opportunities inside the current global demand" (Joselyne Nájera, 2017) or "Does Modernization of Rice Value Chains in Senegal illustrate a Move Toward The Asian Quiet Revolution? (Guillaume; M.
These two studies deeply analyze the impacts, 3 opportunities, and challenges that the value chain of rice will face under the impacts of people (farmers) and technology (modernization). In the ASEAN region, there are many profound studies on the rice value chain, particularly in Thailand and India - the great powers in the rice industry. There are some studies such as "Rice Value Chain management in Thailand" (Viriyangkura, 2018) and "Value Chain Analysis of Wheat and Rice in Uttar Pradesh, India" (McCarthy, S., Singh, DD and Schiff, H. These two studies deeply analyze the effects that national policies affect the global rice value chain.
The research of Viriyangkura in 2018 indicated that government policies positively affect the rice value chain in Thailand. Specifically, he pointed out that a free market platform can enable farmers to deeply participate in the global value chain by producing high-quality rice grains to not only stop at the white rice. He pointed out that many products have high added – value from rice so that Thailand needs to pursue. His research also gave some recommendations such as there should be more credit programs to support farmers and connect farmers with foreign investors and invest more in research to conduct new varieties with high-quality rice to plant in bad weather.
The research McCarthy et al. in 2008 revealed that not all government policies positively affected the capacity to participate in global value rice. The more stringent the policy, the harder for rice products to participate in the global value chain. Sometimes, however, there should be strict management policies on rice export to the world to ensure national food security.
The author also made some recommendations about the necessity of having floor prices for rice purchasing. With this policy, Indian farmers will have more choices when selling rice. If not sold at a price higher than the floor price to traders, Indian farmers can sell it to the Indian government at a set price. There are some intense and specific value chain studies in Vietnam such as "Report on institutional review of rice value chain" (CIEM, 2017); "A Critical Analysis of the Value Chain in the Rice Industry and its Effects on the Export Rice Industry in Kien Giang Province, Vietnam" (Van Ngoc Bach et al, 2016) and "Review, Analysis, Evaluation and Building a Plan for Developing the Rice Industry Value Chain in Tra Vinh Province, Vietnam "(Vo Thi Thanh Loc, 2016).
All three studies analyzed the effects of institutions, policies, and value chain factors on the rice value chain. Some of 4 the methods used in the three papers are questionnaires and SWOT, and quantitative analysis.