Agricultural marketing, a bridge between producers and consumers, is related to the activities taken places in the whole process of agricultural products’ moving from producers to consumers. The effective marketing system ensures to efficiently connect farmers and consumers and to rapidly transfer consumers’ needs to the production process. Such a system will then help to develop not only agricultural economy but also the economy as a whole. In order to develop a consumer oriented agricultural economy, it is crucial to build an efficient agricultural marketing system.

An agricultural marketing system is more important in developing countries than in developed countries for two distinctive reasons. First, in fast-growing countries like Vietnam, urban areas develop rapidly due to a large migration of population from rural to urban areas. As urban areas grow, it is very important for a nation to efficiently supply food to the urban population. To stabilize the food supply, it is necessary to have an efficient agricultural marketing system. Moreover, developing countries need to lower prices of agricultural goods in order to have competitiveness in the international market. A successful agricultural marketing system will help in reaching this goal by reducing distribution costs to overseas markets.

Agricultural marketing in Vietnam is not well developed in many aspects. Because of the small farming scale, it is difficult to apply mechanization and technological progresses. Standardization of quality and packaging of agricultural products is also poor, and processing industries are not well developed. Rural infrastructure for agricultural marketing, such as roads, warehouses, ports, and retail markets, is not well developed. Market information for farmers is limited and information infrastructure in rural areas is also not well established. Market monitoring system which controls behaviors of traders is poorly developed. Quality control of agricultural products, foodstuff hygiene, and safety guarantee in the market are underprepared. In urban areas, wholesale markets are not modernized and agricultural products are not traded by transparent pricing systems.

Facing these problems, the Vietnamese government should urgently modernize its agricultural marketing system to promote agricultural development as well as development of the nation as a whole. In order to reach this goal, it would be appropriate for Vietnam to utilize similar experiences from other developed countries. This paper therefore reviews the current situation and problems of agricultural marketing in Vietnam and suggests policy measures for modernizing agricultural marketing based on Korea’s experiences.

This article is organized as follows: Following introduction, section two reviews the current situation and issues of the agricultural marketing system in Vietnam. Section three summarizes strategies for the government of Vietnam to adopt in modernizing agricultural marketing, followed by conclusions.

CURRENT SITUATION AND PROBLEMS OF AGRICULTURAL MARKETING SYSTEM IN VIETNAM

Production Structure

In 1986, Vietnam started the renovation process (Doimoi), moving from the centrally planned economy to a market-oriented economy. It transformed agricultural production from cooperatives (collective farms) to independent farm economies, and distributed land to farmers on long-term basis. Vietnam shifted from a food importer to the world's fourth -largest exporter of rice in 1989. In 1995, Vietnam became the seventh member of the ASEAN Free Trade Area (AFTA), and it became a full member of the World Trade Organization in 2007.

The share of GDP accounted for by agriculture, forestry, and fishery sector has decreased from 38.7% in 1990 to 19.7% in 2012. In Vietnam, there are 9.8 million farm households. Most of them are subsistence farms whose cultivating land size is less than 0.5 ha. The process of cooperative land reallocation in Northern and Central Vietnam has resulted in the piecemeal nature of land distribution. Average farm size in the Red River Delta is only 0.2 ha and most farmers have 8 ~ 12 small plots of land with an area of 200 ~ 400 m² each. Farmers owning more than 1 ha increased very slightly while landless households have increased sharply (General Statistical Office of Vietnam). Fig. 1 Table 1

Major crops in Vietnam include rice, sugar cane, corn, coffee, mango, tea, peanut, cashew nut, and etc. Major livestock products are pork, beef, and poultry meat.

Farm Organizations

Cooperatives

In 2009, there were a total of 7.3 thousand agricultural cooperatives, mainly concentrated in the North and being converted from old-style cooperatives. The activities of agricultural cooperatives are very limited. They mainly focus on providing input services to farms (over 86% provide irrigation services, over 50% provide electricity services and 35% provide agricultural extension services). These activities largely rely on infrastructure and organizational structure remained from old-style cooperatives (Dan Kim Son, 2009). Table 2, 3

State-Owned Enterprises (SOEs)

The State-owned trading and service enterprises played a dominant role in importing and distributing fertilizers as well as exporting rice, rubber, coffee, tea, vegetables and fruit. For a long time, SOEs have enjoyed an exclusive role in import-export activities and benefited from the systematic advantages including quota system, subsidized credit, prioritized access to investment funds and loans, and favorable allocation of public land and facilities. At the same time, they are under State control in the areas of organizational structure and financial resources and have obligations to fulfill political and social tasks assigned to them. This business model is preferred by SOE leaders and staffs as well as by certain State agencies supervising them. The SOE transformation process, for this reason, has not been easy.

Private enterprises

Since the adoption of the Enterprise Law, which replaced the Company Law and the Law on Private Enterprises of 2000, the private sector has made strong progress in its development.

The private sector currently plays a very important role in processing, distributing and trading activities, particularly in the domestic market. In addition, there are a good number of enterprises located in rural areas producing handicrafts, construction materials and providing services. Some even have started engaging effectively in exporting agro-forestry products and agricultural inputs. However, the size of private enterprises in rural areas is small and their labor forces are unskilled.

Although foreign-invested enterprises are increasing in number, only a small percentage of them are engaged in the agriculture, forestry and fisheries sector. Investments in these sectors only account for 7.1% of the total foreigninvested funds. The key investors in agriculture are Taiwan, Thailand, Singapore, France and Belgium. Taiwanese investment accounts for as much as 27% of the on-going projects (Dan Kim Son, 2009).

Demand Structure

Vietnam is one of the fastest growing economies in the world. Its average annual GDP growth is around 7.2% for 2001?2011 period. Its per capita GDP was US$ 1,517 in 2011. Vietnam also has a large population of 88.8 million persons in 2012. Following this growth, food demand is growing fast. Demand for agricultural products is growing not only in final demand, but also in materials for food processing industries. Export of agricultural products has increased significantly in recent years. Major items of agricultural products are rice, coffee, tea, rubber, pepper, cashew nut, and etc. Agricultural export accounted for 14.9% of national exports in 2012.2

MARKETING CHANNELS

Rice

Commercialized rice production regions in Vietnam

The main rice production areas are in the two deltas, the Red River Delta (RDD) and Mekong River Delta (MRD). These deltas account for only about 15 percent of total areas in the country but account for over two-thirds of rice production in Vietnam. The Mekong River Delta is more commercialized than the Red River Delta area. (Agrifood Consulting International, 2002).

Marketing Channels

The relationship among the marketing agents involved in the rice marketing system is extremely complex. Farmers, assemblers, wholesalers, retailers, millers, and exporters all interact with each other and are responsible for the movement, storage, processing, export and distribution of the paddy and rice within the country.

The first channel identified by Post Harvest Technology Institute (PHTI, 1999) is a subsistence or localized channel whereby farmers bring paddy to a local miller (or mobile miller) for processing. Milled rice is either sold in local markets or returns to the farmer for subsistence needs.

The second channel reflects the rice chain where rice flows for domestic or overseas markets, but primarily oriented towards overseas markets (Fig. 3). In this channel, farmers interact, either directly or indirectly, with provincial food companies. Farmers sell paddy directly to an agent of the food company or to a private trader. The agents store paddy and sell them to provincial food companies for processing purpose. The provincial food companies produce whole rice, broken rice, and bran for two separate channels – the export market and domestic markets. Rice for export markets is sent to other provincial food companies, such as General Food Company in the North (VINAFOOD 1), General Food Company in the South (VINAFOOD 2), or directly to overseas markets, depending on the 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 for food and feeding purposes. Byproducts, such as bran and husk, are sold to feed manufacturers and brick and sugar enterprises, respectively.

Fruits and Vegetables

Major fruit and vegetable production regions in Vietnam

Vietnam has three major fruit production areas: Mekong Delta, Northern Upland and Southeast region. The Mekong Delta is the most important fruit growing area in Vietnam. In the mid-1990s, it accounted for over half of the total fruit acreage in the country. However, since 1995, the Mekong Delta’s share of fruit acreage has decreased relative to other regions. Fruit producing area in the Northern Uplands has grown quickly in the 1990s, reflecting growing demand for fruits from consumers in Hanoi and China. The Southeast has also been growing rapidly. This area has been the center of dynamic growth in agro-industry, producing fresh and processed fruit products for consumers in Ho Chi Minh City and for export (IFPRI, 2002).

The largest and fastest-growing fruit items are longan, litchi, and rambuttan. These fruits represent 26 percent of the total fruit acreage. Litchi is mainly grown in the North, rambuttan in the South, and different varieties of longan are grown in the North and South. Bananas are also an important fruit crop, accounting for 19 percent of total fruit acreage, but banana acreage remains unchanged since 1990. Citrus and mango are also developed in recent years. The areas allocated to citrus and mango have grown, on average, at 18 percent and 11 percent per year, respectively. These fruit crops (longan, litchi, rambuttan, banana, citrus, and mango) account for over 70 percent of total fruit acreage in Vietnam (IFPRI, 2002).

Vegetables are cultivated mostly in the RRD (Red River Delta) and MRD (Mekong River Delta). In the RRD, the total area of cultivated vegetables is cumulated to be about 26.9 percent of total vegetable growing area in Vietnam. In the MRD, the vegetable area is about 21.1 percent of total vegetable acreage.

Marketing channels

MARKET INFORMATION

The majority of farmers utilize the administrative information system (represented by the village/hamlet heads and Commune People’s Committees) as the main source of information about policy changes, agricultural production, and credit and insurance.

The internet remains unfamiliar to the rural population. About 72.4% of farmers have never heard of internet. Those who do have access often use internet at places like internet coffeehouses (86.7%) and this group is mainly young adults who use internet for entertainment purposes.

In general, lack of access to information remains as crucial disadvantage to the rural population. While the urban population has access to information through telephones, mobile phones, television, newspapers, internet and billboards/ posters, rural people rely mainly on community relationships and small to medium sized traders. Therefore, rural population usually ends up with less favorable positions in business relationships; faces more risks when participating in the market; misses out on valuable opportunities; and has difficulty in accessing services (e.g. training, health care and credit).4

FOOD PROCESSING AND INFRASTRUCTURE FOR AGRICULTURAL MARKETING

As for processing, farmers complain mostly about the lack of capacity to carry out semi-processing of agricultural products (including drying) (28% respondents), followed by the lack of information about market prices and the high cost of transportation (19% and 18% respectively) (Dan Kim Son, 2009).

One of the chronic problems of Vietnam’s agriculture is the long-lasting conflict between processing plants and raw material production areas. While raw material producers have difficulties in finding markets for their products, processing factories have to operate far below the capacity level because of various reasons: lack of raw materials, too small raw material zones, too expensive raw materials for buyers and too cheap for sellers, substandard quality, etc.

Although roads to the commune centers exist in most rural areas, they are often used more often in the dry season because they are not built solidly. In the Mekong River Delta and mountain regions, many roads can only be used for basic means of transportation for motorbikes rather than for trucks. These roads are not appropriate for agricultural machinery due to the narrow width and weak bridges. Waterways are the unique strength of the deltas, particularly in the Mekong River Delta. However, because sea harbors are not dredged properly to facilitate the arrival and departure of large ships and the loading and unloading of cargo, waterways have not been used efficiently. Railway and airway systems have not been adequately invested to facilitate transportation of agricultural and forestry products. Therefore, shipments which are bulky of urgent, particularly in the case of perishable products such as meat, vegetables, flowers and etc, remain a challenge for many farmers.

The warehouse and storage system in Vietnam is underdeveloped when compared to other countries, which results in high transaction costs, unpredictable seasonal prices changes of agricultural products and high loss rates.

PROBLEMS OF AGRICULTURAL MARKETING SYSTEM IN VIETNAM

Vietnamese agricultural marketing system is not well developed in many aspects. Standardization of quality is poor, and processing industries are not well developed. Rural infrastructure for agricultural trade (roads, warehouses, ports, retail-markets) is poor. Marketing facilities, such as packing and milling plants are not sufficient in rural areas.

Market information for farmers is limited and information infrastructure in rural area is also poor. Only 33 percent of farmers can get access to news papers and 72.4% of farmers do not know of and/or how to use the internet. Prices of agricultural products are unstable and suffer from frequent fluctuation which makes the income of farmers and price of exports very unstable.

Marketing channels and stages are complex and have multiple layers. While local assemblers play a significant role in marketing of agricultural products in rural areas, role of agricultural cooperatives is not active. Although wholesale markets in large urban areas play a very important role, they are congested and not modernized. Agricultural products are not traded through the transparent pricing systems. Even though private traders take a lion’s share in agricultural marketing, market monitoring system which controls behaviors of traders is not well developed.

Creating brand for agricultural products is weakly established, particularly for local specialties to expand the market and for export. Quality control of agricultural products, foodstuff hygiene and safety guarantee in the market are not well prepared. Packaging of agricultural products is also poor. Moreover, enterprise and state agencies suffer from limited capacity of dealing with international trade disputes and ensuring fair competition in export and import of agricultural products.

STRATEGIES FOR IMPROVING AGRICULTURAL MARKETING IN VIETNAM

Improvement of agricultural marketing system is crucial in increasing both farmers’ incomes and welfare of consumers. It is also important in promoting agricultural development. Although all aspects of agricultural marketing should be modernized to meet needs of farmers and consumers in Vietnam the government should focus on urgent policy agendas below under limited resources.

Considering Vietnam’s situations and reflecting upon Korean experiences, following policy measures are recommended.

Modernization of Public Wholesale Markets In Large Urban Areas

The government of Vietnam should make a solid plan for modernization of urban wholesale markets. Because urban population has been growing rapidly, it is necessary to have modernized agricultural wholesale markets which enable the efficient distribution of large volume of food items needed by the urban population. Currently urban wholesale markets in Vietnam are very poor in terms of sanitation and quality control. Those markets do not have modernized transaction system in which prices are determined in an open and transparent manner. Modernized wholesale markets are also expected to promote development of agricultural marketing organizations in rural areas.

In order to build modernized agricultural wholesale markets, the Vietnamese government should make a master plan for modernizing agricultural marketing system, including construction of modernized wholesale markets. The master plan should include an analysis on the current situation and problems of agricultural marketing system and strategies for improving it. Based on the modernization plan of agricultural marketing, the government is suggested to invest some government budgets in building public wholesale markets. If the government of Vietnam does not have sufficient budgets for building modernized wholesale markets, it is necessary to consider overseas fund sources. One source of foreign funds could be EDCF (Economic Development Cooperation Funds) from the Korean government. Korea also had an experience in borrowing public loan for construction of public wholesale markets from IBRD. The Korean government borrowed USD 50 million from IBRD in the early 1980s to build Garak agricultural wholesale markets.

When constructing agricultural wholesale markets, the government of Vietnam should also obtain know-hows regarding operation of wholesale markets by studying experiences of advanced countries. For success of modernization of wholesale markets, it is crucial to have efficient and transparent operation system of wholesale markets.

Construction of Marketing Facilities in Rural Areas

It is highly suggested that the government of Vietnam make programs to promote construction of marketing facilities in rural areas. Because current marketing facilities are obsolete and cannot support demand, Vietnam is suffering from high post-harvest losses, which amounts to be about 30% of total harvest. In order to improve the quality of agricultural products and to reduce post-harvest losses, it is necessary to construct marketing facilities such as RPCs (Rice Processing Centers) and APCs (Agricultural Product Processing Centers). RPCs are expected to decrease costs of drying, storing, milling and packaging by a half of conventional system, in which farmers are carrying out post-harvest management by hands. RPCs also can improve quality of milled rice and stabilization of price. APCs function not only as a place applying post-harvest technologies but also a marketing center carrying out pooling of products, branding, contract farming, dissemination of marketing information, selling, improvement of physical distribution, and etc. It is desirable to make government programs to subsidize a part of total construction cost in farmers’ organizations that attempt to build RPCs or APCs.

Construction of marketing facilities should be accompanied by research and training in the field of post-harvest technologies. In order to operate RPCs and APCs successfully, it is required for operators of those facilities to have sufficient knowledge about post-harvest technologies. It is therefore necessary to have training programs for post-harvest technologies.

Provision of Market Facilitating Functions

It is recommended that the government of Vietnam provide public goods in agricultural marketing, such as grading, standardization, safety inspection, and market information. The government should set up quality standards to facilitate efficient transactions in markets, and also to promote standardization of packaging size and logistical equipments such as pallets. Importance of safety inspection should be emphasized, too. It is recommended that the government invest government budgets in information infrastructure in rural areas to allow farmers to access market information more conveniently. In order for farmers to access market information easily, it is necessary to have media such as newspapers, TVs, radios, and Internet. Market information, including current and future prices, plays a crucial role in farmers’ ability to get fair and favorable prices.

Enactment of Basic Law about Agricultural Marketing

It is also recommended to have a basic law about agricultural marketing. Based upon “The Law about Marketing and Price Stabilization of Agricultural and Marine Products,” the Korean government is implementing various programs to improve agricultural marketing. The law deals with the issues such as production and supply control of agricultural and marine products, agricultural and marine product wholesale markets, wholesale markets operated by producer associations or private companies, price stabilization funds for agricultural and marine products, and renovation of marketing institutions.

Nurturing Marketing Cooperatives

The government of Vietnam is also recommended to help farmers to organize marketing cooperatives by providing guidelines in forming agricultural cooperatives and by providing operation funds to cooperatives. Currently agricultural cooperatives in Vietnam are so small in scale and mostly carrying out functions of input supply. They do not carry out marketing functions efficiently. Marketing cooperatives are the agricultural cooperatives which specialize in selling agricultural products by organizing based upon individual product item. In selling agricultural products, marketing cooperatives often own and operate marketing facilities such as APCs (Agricultural Products Processing Centers) for fruits and vegetables, RPCs (Rice Processing Centers) for rice, or slaughtering house for livestock products.

In Korea, agricultural cooperatives account for about 40 percent of total marketed fruits and vegetables. There are 1,101 local agricultural cooperatives and 82 marketing cooperatives which are specialized in by a group of products. The Korean government has been nurturing agricultural cooperatives by providing low interest operating funds and subsidies for construction of marketing facilities in rural areas. The Korean government is subsidizing 30?40% of total construction cost for marketing facilities.

At the national level, it is necessary to organize marketing boards or councils which can help farmers to promote consumption and to control supply. With marketing boards or councils, farmers can increase consumption of agricultural products by utilizing self-help funds (check-off system) or can control supply by collective actions. For example, farmers can reduce the supply of some agricultural products by limiting quality or sizes of marketable products. The marketing board or council can set up quality and size regulation by the majority vote of their member farmers. With these schemes, farmers have capability to equate supply and demand and therefore can enjoy stabilized agricultural prices

DISCUSSION

Vietnamese agricultural marketing system is not well developed in many senses. Standardization of quality is also poor, and processing industries are not well developed. Rural infrastructure for agricultural trade (roads, warehouses, ports, retail-markets) is poor. Marketing facilities, such as packing and milling plants are not sufficient in rural areas.

Market information for farmers is limited and information infrastructure in rural area is also poor. Only 33 percent of farmers can get access to newspapers and 72.4% of farmers do not know internet. Prices of agricultural products are unstable and suffer from frequent fluctuation which makes the income of farmers and price of exports very unstable.

Marketing channels and stages are complex and have multiple layers. While local collectors play a significant role in marketing of agricultural products in rural areas, the role of agricultural cooperatives is limited. Although wholesale markets in large urban areas play a very important role, they are congested and not modernized. Agricultural products are not traded in a transparent manner. While private traders take a lion’s share in agricultural marketing, market monitoring system which controls behaviors of traders is not well developed.

Quality control of agricultural products, foodstuff hygiene and safety guarantee in the market are not well prepared. Packaging of agricultural products is also poor. Moreover, enterprise and state agencies suffer from limited capacity of dealing with international trade disputes and ensuring fair competition in export and import of agricultural products.

Considering Vietnam’s situations and reflecting upon Korean experiences, it is suggested for Vietnamese government to adopt policy program of modernization of public wholesale markets in large urban areas, construction of marketing facilities in rural areas, provision of grading, standardization, safety inspection, and market information services, enactment of basic law about agricultural marketing, and nurturing marketing cooperatives.

적 요

베트남은 영세농 위주의 농업 구조로 기계화 등이 미흡하고 농산물의 품질표준화, 등급화 등이 미흡하며, 도로, 창고, 항구 등 농산물 유통관련 사회간접자본이 부족하여 물류비가 높게 발생하고 있다. 농촌에 저장고, 선과장, 도정공장 등 유통시설 이 부족하여 포장의 수준이 낮고 상품화가 미흡하며, 냉장유 통체계 미비로 위생관리가 취약하다. 농산물 가격 풍흉에 따 라 심하게 변동됨에도 불구하고 농촌에 커뮤니케이션 매체가 부족하여 가격 등 유통정보의 공급이 미흡하다. 베트남 전역 에 63개의 도매시장이 운영되고 있으나 대도시 도매시장들은 공간이 협소하고 혼잡하여 위생 관리에 문제가 많고 도시 팽 창에 따라 도시민에게 농산물을 효율적으로 공급하는데 제약 이 크다. 또한 도매시장 내 거래가 소규모 영세 상인에 의해 불투명하게 이루어짐으로써 상인들의 불공정 거래를 관리할 수 있는 체제가 미흡하다. 농산물 유통개선은 농가소득 증대 및 소비자 후생 증대를 위해 필수적이며, 농업 및 국가전체 발전을 위해서도 중요하다. 한국의 개발 경험에 기초하여 베 트남 정부가 우선적으로 고려해야 할 농산물 유통 분야의 개선 사항은 하노이를 중심으로 한 대도시 지역 도매시장 현대화, 저온저장고, 산지유통센터와 같은 산지유통시설의 건립, 등급 화 및 표준화, 식품안전성 검사, 유통정보 등 유통조성 기능 확대, 농산물 유통 기본법 제정, 생산자조직 육성 등이다.