Group Project

VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY
INTERNATIONAL UNIVERSITY

MANAGERIAL ECONOMICS

PROJECT

RICE MARKET IN VIETNAM

Group Members
Vo Ngoc Duy Nghi
Tran Nguyen Hoang Uyen

Ho Chi Minh City, 2014
Managerial Economics Project
1

INTRODUCTION 2
I. OVERVIEW OF VIETNAM RICE MARKET 3
1. An overview of agriculture and the role of rice
in Vietnamsfood industry 3
2. Rice production and domestic rice market 4
2.1 Rice varieties and quality 4
2.2 Distribution 5
3. Rice for export market 9
3.1 Vietnams rice export before joining WTO 9
3.1.1 Overview 9
3.1.2 Export revenue 9
3.1.3 Major export markets 10
3.1.4 Barriers 11
3.2 Vietnams rice export after joining WTO 11
3.2.1 Overview 11
3.2.2 Export revenue 12
3.2.3 Improvements 13
3.2.4 Challenges 14
II. AN ANALYSIS OF VIETNAM RICE MARKET 15
1. Rice production and rice market 15
1.1 Resources for production 15
1.2 Rice production and crops situation 16
III. SOLUTION FOR VIETNAM RICE EXPORT 18
1. Lession from other rice exporting countries 18
1.1 Thailand 18
1.2 India 18
1.3 America 19
2. Solution 19
2.1 A clear export strategy in specific periods 19
2.2 The specification and proper policies 19
2

2.3 Maintain the stability of domestic and export demand 20
2.4 Develop the related processing industry 20
CONCLUSION

3

INTRODUCTION
Rice is the most important commodity in many countries. In some countries with
advantageous natural conditions, rice is not only for domestic demand but also become one of
the main exported products, even with worldwide reputation.
In agricultural products, absolutely; rice is indispensable to the daily life of the 90 million
Vietnamese. It plays the most important role in Vietnams food security and rural economy
which generates jobs for 60% of the countrys labor force and is a source of export revenue.
The two rich locations are Red River of the North & Mekong Deltas of the South,
respectively are responsible for most of the rice.
Vietnam is known as one of the most important rice producers and exporters in the world. We
couldnt imagine that before 1986, our country had to import rice, because at that time
Vietnam had not enough rice for domestic demand. These necessary rice imports were high -
exceeding 1 million tons during the late 1960s and in 1976.
Along with a series of profound macroeconomic and institutional policy reforms after 1986
and accessing to WTO, Vietnamese economy had run on the path to becoming a market
economy effectively. Vietnam had more chances to improve economy and agriculture as
well. From an agriculture industry with weak financial capacity, shortage of capital to
improve production technology and low labor productivity, becoming a member of WTO,
Vietnam reach the second largest exporter for rice in the world with many improvements and
supporting policies from government.
With the knowledge from studying Managerial Economics, and under Managerial
Economists point of view, we analyze the Vietnamese rice export market from 2003 to 2013,
and suggest some realistic and effective solutions to improve our export situation for rice by
quantity and quality as well. We divide this project into 3 main parts:
1. Overview of Vietnam rice market
2. Rice products in Vietnam market
3. Lessons for Vietnam
4

Since limited time and sources, mistakes cannot be avoided. The comments of readers will be
valuable for our project to be more completed.
I. OVERVIEW OF VIETNAM RICE MARKET
1. An overview of agriculture and the role of rice in Vietnams food industry
Agriculture is contributing more than 20% of Vietnams GDP, accounting for up to one
quarter of the national exports revenue, and creating jobs for half of the workforce with 65%
of them in rural areas, plays a mandatory role in the economic development of a developing
country. Over the years, agriculture has been a foundation of Vietnams economy.
In 2013, agriculture in Vietnam witnessed a spectacular overall growth of 2.67%. The
primary agricultural sectors are farming and export of rice, corn, vegetables; developing short
term and perennial industrial plants; planting fruit cops; and livestock. A number of policies
have been deployed focusing on hunger eradication, poverty reduction, and social security
maintenance in rural areas. The government raised over 41.3 thousand billion VND for New
Rural Area program in this year, making a firm background for agriculture development in
the future.
Rice is Vietnam's second most valuable export, after oil and Vietnam is the third largest
exporter of rice (after Thailand and the United States) in the world. Rice is very common in
daily meal of 90 million Vietnamese people and is identified as the most significant product
in food security of Vietnam. It also plays an important role in employment situation as the
number of rice farmer accounts for 60% of the agricultural labor force of the country. The
Mekong Delta and the Red River Delta regions are two main granaries, holding for over 5
million hectare of rice cultivation land in Vietnam. In 2013, the area of rice cultivation
reached 7.9 million hectare for the whole year, while rice productivity was 55.8 quintal per
hectare, yielding a total of 44.1 million ton of rice. During the 10 year period from 2003 to
2013, the annual rice export maintained 4 5 million tons with an export turnover of 2 2.7
billion USD. Rice yield has increased constantly during the recent years after high-yield
varieties have been put into cultivation and production. These not only guarantee the national
food security, satisfy the domestic demand, but solidify the position of Vietnam in worlds
rice export and contribute in the overall development of the national economy also.

5

2. Rice production and domestic rice market
2.1 Rice varieties (brand) and quality

Figure 1 describes in detail the process of paddy/rice processing in the Me-kong River Delta.
In general, there are seven different steps in the process from paddy to rice. The first step is
checking the standard requirement on moisture and the grain length of paddy. Secondly, the
paddy is then sorted according to C1 and C2 standard quality. After sorting, some paddy
that contains a high moisture degree will be dried by the dryer or sun-dry. The well-dried
paddy then will be stored in the warehouse. The next step is rice processing. The paddy will
be put into the processing chains for milling into brown or white rice. In the case of
producing rice for export, the brown rice will be polished into polished rice before weighing
and packaging. Finally, the finished products will be stored in the warehouse till it will be
sold on the market.

Figure 1. Steps in the paddy to rice process

Vietnamese farmers have cultivated local varieties through years. It is estimated that there are
over 200 rice varieties planted in Vietnam. Some of these varieties are Du Huong Rice, Nang
P
A
D
D
Y

Checking Sorting Drying
Storing
Milling Export
Polishing Packaging Storing Selling
Domestic
Market
(Brown Rice)
(White Rice)
(Polished Rice) (Polished Rice)
(White Rice)
6

Thom Cho Dao Rice (Long An), Nep Cai Hoa Vang glutinous rice (Nam Dinh), Tai Nguyen
Rice (Long An), Tam Xoan Rice (Nam Dinh), etc. Besides, some foreign rice varieties that
give better quality are gradually popularized for farming, such as Thai Jasmine, Japanese
Akita, Kown Dak Mali, etc. Hybrid rice, which gives double yield compared to other rice
varieties and provides farming advantages like better insect resistance, shorter life time,
higher quality and higher selling price, is now planted on a wide scale and becomes one of
the most important products in food security in Vietnam
A research conducted by Can Tho University revealed the supply chain of rice product in
Vietnam. Main components of rice supply chain are inputs, production, collection,
manufacture, trade, and consumption. Almost all rice is sold to collectors, or merchants.
Intermediary parties may get intervene in this process. Collectors sell rice directly to
marketplaces, wholesalers, or retailers; or to food processing companies that include
polishing and husking mills. In the Mekong Delta region, one third rice is consumed
domestically, and the other is for export purpose. Domestic market is considered secondary
export market where consumes rice product not qualified for export.
2.2 Distribution
There are three groups of participants in rice marketing in the Mekong River Delta, namely:
1) Merchants; 2) Commission agents/brokers; and 3) Facilitators
Merchants, such as rice assemblers, wholesalers, millers/polisher, retailers, and
middleman/brokers are the main actors in the market. In general, more than 7 million tons of
paddy from the Mekong River Delta were marketed every year, passing through the hands of
assemblers, millers, wholesalers, transporters, and retailers. At least 2 million tons were
transferred to deficit regions within Vietnam, and more than 3.5 million tons were
exported. A study has been made of these actors in five major market places in the Mekong
River Delta (Tiengiang, Angiang, Vinhlong, Cantho, and Soctrang). In fact 53 rice
millers/polishers, 18 assemblers, 49 wholesalers, and 30 retailers were interviewed in this
area.
The merchants
Assembler: Sometimes also known as the trader/transporter, he is the first link between the
farmer and other middlemen. He takes title and collects several smaller lots of scattered rural
7

production by his own capital and combines them into a single load at one location. In so
doing, he typically classifies these di- verse lots into fewer types. To the extent he arranges
for or provides shipping, the key function the assembler provides in addition to assembly is
transport.
Wholesaler: He concentrates the various loads and puts the product into large, uniform units.
These activities all contribute to price formation. In so doing, the wholesaler provides
information to suppliers (e.g., farmers, rural assemblers) and assumes to a varying degree the
risks associated with the transfer of prop- erty rights attached to the goods and services being
bought and sold. He also fa- cilitates mass and specialized storage operations, transportation
and, in general, the subsequent distribution operations involving retailers.
The distinction between wholesaler and retailer is well known: wholesal- ing is concerned
with the activities of those persons which sell to retailers and other merchants and
commercial users, but do not sell in significant amounts to final consumers. In some of the
studies on food marketing in developing countries, wholesale traders are subdivided into rural
assembling traders, collecting wholesalers and distributing wholesalers. Rural assembling
traders accumulate products in the production areas to sell to collecting wholesalers, who
carry the commodities to large towns. On arrival, they sell to distributing wholesalers, who in
turn sell to retailers.
Retailers: The main function of the retailer is to buy wholesale agricultural produce and sell
to consumers at convenient locations and times in various forms and quantities. In general,
retailers can be found on the markets of agricultural products: retailer-assemblers involved in
buying to complement their stock and retailer-distributors involved in selling from their
stock. In town, retailers often buy from wholesaler-distributors or their brokers and resell to
the consumers. They may also travel to assemble in agricultural production areas. At harvest
time in particular, when the villages in the vicinity of the market hold surpluses, retailers may
prefer to purchase directly from the millers. In addition, the retailers may have a fixed base:
a stall, a shop or a place on the ground, or they may be hawkers, who carry their products
around.
Millers/Food processing companies: Enterprises that use agricultural commodities as raw
material. In the case of rice business, processors or rice millers/polishers have a very
important role in the marketing channel. They change the form of the product (from paddy
8

rice to milled rice). The quality of rice in the market mostly depends on the quality of rice
processing. Depending on the availability of rice polishing machines, rice millers are usually
classified into three groups: pure millers, polishers, and miller-polishers. Pure millers are
millers without any polishing machines. Polishers are rice processors engaged only in
polishing activities and do not mill paddy into raw rice. They buy raw rice from other mills
and process it further. The third group of miller-polishers consists of those millers who have
also polishing machines. These are the most technologically complete mills, able to process
paddy into a polished rice of high quality suitable for export. Moreover, processors or rice
millers not only provide the milling services but sometimes they also are rice trad-
ers/wholesalers. They can buy paddy directly from the farmers or rural assemblers, after
milling they sell the milled rice to SOEs, wholesalers, and retailers.
Exporters/State Owned Enterprises (SOEs): In general, these are companies that mostly buy
and sell agricultural products in foreign markets. These products vary from those freshly
harvested to those that have gone through various stages of processing. Considering rice
trading, rice exporters mainly are the SOEs or government companies.
Commission agent Broker
These agents work for a commission on behalf of other participants. They operate at all
levels of the marketing channel. Typically, they work for either a flat rate or percentage (of
the selling price) commission. Brokers bring buyers and sellers together and assist in
negotiations on a more ad hoc basis. Some brokers may operate as auctioneers, auctioning
products on behalf of collecting wholesalers.
Purchasing agents are most common. They generally have a long-standing relationship with
buyers and make purchases for them. In addition to purchasing agents, also selling agents are
found. Brokers do not invest in trade, nor do they take any price- risks. They provide an
insight into the functioning of the market as they are relatively better informed than
wholesalers. Moreover the existence of commission agents or brokers permits wholesalers to
devote their energy to the commercial functions for which they have a comparative
advantage.
Facilitators
Traders not only use brokers but also facilitating intermediaries. With regard to the rice
9

market in Vietnam, warehousing firms and transportation firms are considered as important
facilitators in the market. Other government institutions or private agencies, also involved in
the marketing chain are: porters, bag-sewers, banks, money-changers, agents for market
regulation like quality control, tax agent, market authority, etc. In sum, the above classifi-
cation of marketing agents is useful for our study. They will be applied for analyzing in more
detail all types of actors/agents that perform different marketing functions in the rice
marketing channels in Vietnam

Brokers
Facilitators
s
Buying Agent
Selling Agent
Transporter
Porter
Bag-sewer
Banks
Store Manager
Agent for market regulation (quality control, tax
agent, market authority, etc.)
Actor
Merchant
Assembler
Wholesaler
Retailer
Miller
Exporter/SOEs
10

3. Rice for export market
3.1 Vietnams rice export before joining WTO
3.1.1 Overview
Vietnam is known as one of the most important rice producers and exporters in the world.
Surprisingly, before 1986, the country had to import rice, because rice production could not
meet domestic demand. Starting in 1987, the country began exporting rice, and transformed
itself from a rice importer to a rice exporter in 1989. From having to import rice to meet
domestic demand, Vietnam became the second largest rice exporter after Thailand in 1997
and rice has always been one of main export products of Vietnam.
Differ from other regional countries, Vietnamese agricultural production in general and rice
production in particular developed stably and quickly. The important point that marked the
development and growth of Vietnamese rice export in 2003-2006 was its high stability in the
fiercely competitive world market. Export value of the latter year was higher than the
previous one.
3.1.2 Export revenue
Table 1 : Vietnamese rice export quantity and value in 2009 2013 (Source: Vietnam
General Administration of Customs)
Year 2009 2010 2011 2012 2013
Quantity
(1000 tons)
4,191 4,466 5,775 5,107 5,012
Value (USD
1000)
791,907 1,045,426 1,547,951 1,403,485 1,638,965

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The rice export quantity was 4.19 million tons in 2009 and 4.46 million tons in 2010. In
2011, it was the first time rice export quantity reached 5.77 million tons which brought about
1.4 billion USD for the country. This is Vietnamese highest result in all 3 criteria: quantity,
export value and price since Vietnam officially joined in the world rice market. In
comparison with 2009, the export rice quantity in 2011 increased by 1.58 million tons (38%),
export value increased nearly double (95%). 2011 was the 23th time Vietnam continuously
exported rice, and the 10th year Vietnamese rice export quantity was over 5 million tons, the
8th year Vietnamese rice export value was over 1 billion USD; and maintained the 2nd
position in the world on exporting rice that overcame India. Reasons for this success was that
Vietnamese rice met 579 strict standards instead of 250 ones in previous time.
The result was highly appreciated by international organizations and buyers. Differ from
other regional countries, Vietnamese agricultural production in general and rice production in
particular developed stably and quickly. Rice production and export helped to increase
income of farmers who planted rice thanks to the highly increase of domestic rice price.
3.1.3 Major export markets
Vietnamese rice does not only exist in traditional markets such as Philippines, Cuba,
Indonesia, it is also expanded to prissy markets such as Japan, EU, South Africa, and Middle
East.
Table 2: 10 leading export markets of Vietnamese rice in 2007 (Source: FAO)

No Export market Export volume
(ton)
Export value
(USD)
Percentage out
of total export
value (USD)
1 Philippines 1,464,136 468,044,523 44.24%
2 Indonesia 1,169,429 378,979,955 35.82%
3 Malaysia 379,513 116,683,893 11.03%
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4 Singapore 82,389 25,911,742 2.45%
5 Japan 64,640 18,728,676 1.77%
6 China 42,720 15,936,649 1.51%
7 Russia 38,594 13,406,442 1.27%
8 South Africa 36,980 10,908,910 1.03%
9 Taiwan 19,521 7,855,138 0.74%
10 UAE 4,561 1,525,849 0.14%
Total 3,302,483 1,057,971.777 100%

3.1.4 Barriers
Vietnamese rice producers are often of small size and disperse. They have no shared strategy
on production procedure, and this leads to difficulty in agreeing for trade mark, quality,
appearance and prices. In addition, producers small size always accompanied with weak
financial capacity, shortage of capital to improve production technology and low labor
productivity. Meantime, in countries with developed agriculture, agricultural production are
conducted on large farms, application advanced production and harvest technology with cut
cost for production. In addition, tremendous difficulty of peasants is their restriction in access
to information on modern science and technology and poor awareness about Vietnam
participation in international economical organizations that is the setback for proper
improvement.
3.2 Vietnams rice export after joining WTO
3.2.1 Overview
Vietnam exports rice to 120 countries. Asia and Africa are the two main importers of
Vietnams rice, responsible for 71% and 21% of Vietnams rice exports, respectively.
Traditional importers of Vietnamese rice include the Philippines, Indonesia, Singapore,
Malaysia, Taiwan, Cuba, the Ivory Coast, Angola and Ghana. Asia was the largest market for
13

Vietnamese rice, demand from the Asian countries, Vietnams traditional rice export markets
- especially the Philippines, Indonesia, and Malaysia - still has potential.
China has emerged as the largest buyer of Vietnams rice, importing about 2.1 million tons a
year, accounting for more than one-fourth of Vietnams rice shipments.
3.2.2 Export revenue
Vietnam primarily has a rice-based agricultural economy. Rice is cultivated on 82% of the
arable land and provinces 80% carbohydrate, and 40% of the protein intake of the average
Vietnamese. The two rich details of the north and south Red River and Mekong,
respectively are responsible for most of the rice. The Mekong River delta accounts for 52%
and Red River delta another 18% of Vietnams rice.

Firgue 2: Vietnams export of rice, 2009-2013 (billion USD) (Source: General
Department of Vietnam Customs)
Vietnams rice export revenue enjoyed a steady growth rate of around 13% - 17% during the
4 year-period and the average revenue doubles that of the period before Vietnams joining
WTO. This shows that the achievement stems not only from the Governments policies
(intensive Investment, R&D, credit support, in rice production sector) but also from the
positive impact of joining WTO as follows:
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- First, many policies have been changed to follow the requirements of the WTO.
These changes have enabled many rice enterprises to improve and develop their
capacities, ranging from production to processing and export.
- Second, there have been changes in the business practices and organizational
structures of many firms and enterprises, especially exporting ones. To be able to
survive in the highly competitive world market, rice exporting enterprises have tried
hard to improve the quality of their products. High quality rice has successfully
entered difficult markets such as Japan.
- Third, gaining the entry to the WTO has created an excellent opportunity for many
Vietnamese enterprises to export to and integrate into the world market. Agricultural
exporting products in general and rice in particular are on the lowest tariff and many
non-tariff barriers have been removed.
- Fourth, becoming a member of the WTO helps to open the Vietnamese economy. The
economic structure will be forced to change focusing on industries which have high
competitive advantages, especially those in rice sector. Agricultural resources will be
used to produce high productive products which can be exported to the world market
with less trade barriers.

3.2.3 Improvements
- Vietnams farmers are rice-growing experts, experienced and industrious.
- Many major rice-growing areas, with highly-evolved, heavily-invested irrigation
systems, have abundant water for irrigation. Further, these areas have convenient
roads and waterways for transporting the rice.
- Rice quality for export is improving thanks to a high rate of mechanization in
agriculture.
- The quantity of rice available for export is often sufficient; hence, rice is regularly
mass grown in a range of quality-classifications throughout the year.
- Vietnams joining the World Trade Organization (WTO) helps rice export. Vietnam
will expand its market and trademarked products that will be protected and at global-
scale. Investors and companies have peace of mind in their own trademark building.
- International business respects Vietnams rice and Vietnamese rice exporters.
15

- Vietnam businessmen are dynamic, fair, and have flair in approaching and developing
export markets.
- Vietnamese government also conducted many positive policies to achieve efficiency
and productivity in growing rice, for example, implementing policy on Management
of agriculture land (protect land for rice cultivation), increasing investment for
infrastructure development in the main rice production areas and strengthen
investment for development of infrastructure serving for socio-economics in
specialized rice producing localities.
- Open trade policy for rice export.

3.2.4 Challenges
- Export price of Vietnamese rice is quite low in comparison with others.
- The use of many high-yield rice varieties which are usually of low quality and
production dominated by small-scale farmers lead to the inconsistency in rice quality
and make it difficult to create brand name for Vietnamese rice.
- Rice production in Vietnam still has many limitations, such as high production cost,
less sustainable agricultural practices, frequently damaged by natural disaster, poor
infrastructure, especially irrigation and transport in mountainous area and storage
facility for rice in the Mekong delta.

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II. AN ANALYSIS OF VIETNAM RICE MARKET
1. Rice production and rice market
1.1 Resources for production
While rice farm size in the Mekong Delta region is generally large, the Red River Delta
region consists of most small size of rice farm. Besides these two important granaries, rice is
also sown in many other regions in Vietnam.

Figure 3: The rice farm size segmentation in Vietnam (Source: The Asian Development Bank
Institute, ADBA)
Total rice farm land area tends to decrease during the recent time due to urbanization;
however, productivity has constantly increased thanks to new varieties and improvements of
According to General Statistics Office of Vietnam report, the proposition of agricultural
households in Vietnam has declined significantly, from 55.7% in 2002 to 51.7% and then
49.2% percentage of households in 2004 and 2016 respectively (GSO, General Statistics
Office of Vietnam 2010). In the Mekong delta in 2011, the number of agricultural households
17

was about 1.83 million, and these covered more than four million hectares of rice land (GSO,
General Statistics Office of Vietnam 2012). The number of agricultural households declined
consistently, and the amount of agricultural land available remained quite limited.

Figure 4: The proposition of agriculture households in Vietnam (Source: GSO, General
Statistics Office of Vietnam, 2010)
The upcoming issue is that the governments policies are limiting production scales in terms
of both the area of land being used and its duration of use, and this may consequently affect
the technical efficiency of rice production in the area.
1.2 Rice production and crops situation
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
2002 2004 2006 2008 2010
Agriculture household segmentation
Whole Country
18

Figure 5: Vietnams rice production and land cultivation area (Source: GSO,
General Statistics Office of Vietnam 2012)
After joining WTO since November 2007, the rice production in Vietnam tends to generally
increase but not remarkably. In the reality towards farmers, the agriculture lands are not only
being dried out, but the saltwater, rain flood submerging ... also cause tens of thousands of
poor farmers in the Mekong Delta still in poor cycle life. At the harvest upcoming, the price
is appeared to be dropped dramatically. Over the years, farmers must suffer the loss to sell
rice with below the production cost; they almost cannot decide the selling price but have to
follow the requested price from the traders. Nevertheless, even though Vietnams rice land
has gradually declined 11% - from 4.5 million hectares in 1999 to the present 4.0 million
hectares - because of industrialization and urbanization, the equivalent area in rice reached
7.75 million hectares in 2012 due to the technological application of the growing of three
crops of rice a year.
On the other side, in 2007 2008, the World witnessed a record of price rising which pushed
around 1 billion population falling into poverty. The triple times increase in rice price during
the period of food crisis in 2008 impacted substantially to the falling of domestic
consumption (from 350$/ton in 11/2007 rose up to 1100$/ton in 5/2008). However, under the
Government subsidize, Vietnam came over the crisis successfully and sustain the gradually
rising from 2009 2013. Besides the population growth annually, the application of new
19

technique in rice production (Global GAP standards, for example) brought about high quality
rice seed with lower cost which promoted strongly the domestic consumption.

Figure 6: Vietnams domestic consumption from 2003 2013 (Source: Indexmundi, 2014)
III. SOLUTION FOR VIETNAM RICE EXPORT
1. Lessons from other rice exporting countries
1.1 Thailand
Thailand is the world leading rice exporter in terms of quantities and turnovers. The decisive
factor in its price in the international market is its quality. Thailand rice is tasty, aromatic,
soft and agreed by all. Its high quality is based on the good nature of the rice itself as well as
the mindset of its scientists - farmers exporting companies customers.
1.2 India
India is one of the leading rice exporters in the world market. Its quantities incessantly
increase during the past decades. The reason is because it has applied various solutions in the
Green Evolution.
Indian government encourages the land and paddy rice cultivation, Baxmati, to serve both
domestic and export demand. India undertakings includes providing machinery and
20

agricultural equipment to farmers through subsidies, credits, supplying them with knowledge
and modern agricultural techniques through courses organized in the form of level consistent
with the farmers. The export procedures are simplified to the greatest extent, reducing the
administrative procedures to encourage maximum traders involved in exporting rice.
1.3 America
To have a high reputation in international market, the United States has many policies of
providing capitals for the production and processing of rice for export. It invests heavily in
technology and engineering, resulting in high quality rice.
With lessons from other countries together with challenges and opportunities Vietnam rice
products meet during the last decade, below are the suggestions for Vietnamese government
to enhance the rice image and its value in the world market.
2. Solution
2.1 A clear rice export strategy in specific periods
What is the target, core value of exporting rice in medium and long-terms? What are the main
missions in certain stages of development considering the position of Vietnam in current and
future world rice market? The government should clarify its role, enterprises and farmers so
that each will make the best performance out of their resources. Vietnamese government
should make suitable adjustments in investment policies, especially policy on management of
agriculture land (land for rice cultivation) to increase investment for infrastructure
development in the main rice production areas, development of infrastructure serving for
socio-economics; investment to develop new rice varieties with high yield and are able to
adapt to climate change (especially hybrid rice); investments for technology in harvesting and
post-harvesting, etc. so that rice products will not only increase in quantity but also in quality,
scales and scopes, ensuring a stable and promising outlook for export activities even during
crisis economic time.
2.2 The specification and proper policies
The government needs to have specified policies to support rice farmers in disadvantaged
regions or areas that are lacking in food, also support the provinces that are located in the
projected area specializing in rice, and helps them to produce efficiently. The government
21

should also have insurance policy for food producing farmer against force majeure. For
example, if the quantities for export cannot be exported because of unexpected economic
events, government should have proper policy to solve those remaining quantities such as
buying all of them from the farmers and store in the national reserves. Government must also
have suitable budget in terms of time and other economic conditions for the farmers and have
to take into account the regulations of relevant organizations that Viet Nam participates in,
especially WTO, so that the export activity can amend itself to comply with all the related
regulations and take full advantage of the market situations to have a proper and excellent
development.
In certain examples we analyzed, the value chain in rice export consists of 5 factors: farmers,
merchant, mill plant, polishing plant and export companies. If the total increasing value of 1
kg rice export is 100%, the farmers get 36.5%, merchant get 18.9%, mill plant gets 18.9%,
polishing plant gets 12.3% and export companies get 28.9%. Thus, the farmers who directly
produce rice export only get less than 2/5 the total benefit of the export activities.
Government should intervene with policies to boost the value for farmers; for example, by
subsidizing, the government will encourage the farmers to produce more, ensuring their
incomes, making full use of the labor and other resources.
2.3 Maintain the stability of domestic and export demand
As we all know, rice is the main and most important produce for most of the countries in the
world including Vietnam. Therefore, when exporting price, on one hand the government has
policies to boost up the production and export activities; on the other hand, however, it must
guarantee the balance between domestic supply and demand, and the rest will be for export.
Nevertheless, export activities must be stable because exporting rice is one of the most
important activities that accounts for the positive balance of trade and payment in the national
income. One sudden change or unexpected fluctuation in rice revenue will lead to serious
economic, and even social, problems. Thus, rice production must first serve satisfactorily the
domestic and second will be for export. The government will have suitable approaches for its
stability when taking into consideration all of the economic and social effects.
2.4 Develop the related processing industry
The government should develop the other industries that directly support the production and
transporting rice such as fertilizer production, agricultural mechanization tools and storage,
22

especially the processing and preservation stages. As we all know, developing processing
industry not only creates the value added for products but it is also an important criteria to
help Vietnam overcome all the technical barriers from other countries, especially when
Vietnam is a member of WTO. Processing industry can be improved by re-equipping with
modern production line to produce varieties of outputs, labels, sizes with competitive prices
in many stages such as drying, sorting, preserving, pre-processing, processing and packaging.
This will result in a considerable improvement in the quality of rice, and in turn, an
increasing flow of net income for the country.
In conclusion, all of the suggestions above will help the government to enhance the
Vietnamese rice brand in the world market. From applying technology into producing and
processing as well as establishing strong relationships between farmers, enterprises and
scientists to harmonize the benefits of all, the government will gradually consolidating the
main factors in rice production and export and will improve the total performance of them all,
leading to an effective and expected gradual increase in annual national income. With such
improvement and if the trade promotion is properly facilitated, the market for Vietnamese
rice will certainly expand in both width and depth: successfully retaining and boosting
transactions with old customers along with finding new ones. At that time, not only rice
products but also the country will gain considerable reputation and prestige in the world
dynamic market.

23

CONCLUSION
Building up from an agriculture country with favorable natural conditions, having been
through a long period preparing to become a member of WTO, rice market in Vietnam has
had many advantages, opportunities, but barriers and challenges as well.
Vietnamese agricultural production in general and rice production in particular developed
stably and quickly. Thanks to some governments policies in favor of rice production
development, rice production in Vietnam is improving quantity and quality as well. And after
joining WTO, Vietnam has many significant improvements for rice production and export.
Nowadays, Vietnam exports rice to 120 countries, and become the second largest rice
exporter in the world, competing with many other strong competitors such as India, Thailand,
Australia, Cambodia, China (Mainland), Egypt, Paraguay, Pakistan, and the United States.
However, the government does not pay enough attention to the standard life of rice farmers,
and poor management in rice land planning holds back the development of rice production,
makes production cost increase and wastes labor force. In addition, export price of
Vietnamese rice is quite low in comparison with others; exported rice is still low quality; rice
production in Vietnam still has high production cost, less sustainable agricultural practices,
frequently damaged by natural disaster, poor infrastructure, especially irrigation and transport
in mountainous area and storage facility for rice in the Mekong delta.
Vietnam has had a turning point since it joined WTO with many opportunities and challenges
waiting ahead. As the economy is integrating into the international market,
Vietnamese government now has greater responsibility to control and maintain its stability,
ensuring the mutual benefits of all participants in the national economy. Basing on this
condition, all of the solutions we have made will, to a certain extent, encourage the rice
domestic and export activities in a way that stable development is maintained. Only with such
development can Vietnam really compete healthy and strongly prosper in the contemporary
world market in the foreseeable future.

24

REFERENCE
Asian Development Bank Institute (ADBI) , The Second Training on Agriculture
Productivity and Natural Resources Management, Rice Value Chain in Vietnam
Do Tuyet Khanh, 2009, "Food crisis in the world and Vietnam's agriculture", Thoi Dai Moi,
2009: 17
Food and Agriculture Organization of the United Nations (FAO). Available at:
http://faostat.fao.org/
General Statistics Office of Vietnam (GSO). Statistical Yearbook of Vietnam, various years.
Available at: http://www.gso.gov.vn/
Indexmundi, 2014, Viet Nam Milled Rice Domestic Consumption by Year, Retrieved 13
Jan, 2014 from http://www.indexmundi.com/agriculture/?country=vn&commodity=milled-
rice&graph=domestic-consumption
Mekong Oryza. Available at: http://mekongoryza.com/
Tran Duc Vien, Nguyen Thi Duong Nga, 2009, Economic Impact of Hybrid Rice in Vietnam:
An Initial Assessment
Vietnam Customs. Available at: http://www.customs.gov.vn/English/Default.aspx
Vietnam Food Association (VFA). Available at: http://www.vietfood.org.vn/en/
Vo Thi Thanh Loc & Nguyen Phu Son, 2010, Value Chain Analysis of Rice Product in the
Mekong Delta

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