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Vietnam’s Rice Policy: Recent Reforms and Future Opportunities

Vietnam’s Rice Policy: Recent Reforms and Future Opportunities. Chantal Pohl Nielsen. University of Copenhagen, and Danish Research Institute of Food Economics. Background 1980 ’s : Vietnam a chronic importer of rice 1997 : World’s 2 nd largest exporter after Thailand

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Vietnam’s Rice Policy: Recent Reforms and Future Opportunities

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  1. Vietnam’s Rice Policy: Recent Reforms and Future Opportunities Chantal Pohl Nielsen University of Copenhagen, and Danish Research Institute of Food Economics

  2. Background 1980’s: Vietnam a chronic importer of rice 1997 : World’s 2nd largest exporter after Thailand In part due to Doi moi policy reform in 1986: collectives  individual farm households New trade-off between policy objectives: 1. Sufficient rice supplies at affordable prices 2. Foreign exchange earnings from rice exports Objective 1 very important: - Rice exports regulated by a quota until May 1, 2001 - Only state-owned enterprises have had access - Fertilizer imports also controlled by quotas - Conversion of paddy land to other activities restricted

  3. Objectives • Explore the economic consequences of: • Removing the rice export quota & fertilizer import quota • Current inflexibilities regarding land allocation and recent land re-allocation plans • Current preferential trade agreements that Vietnam does not yet benefit from, ex. European Union rice imp. regime • Methodology and data • Model: Standard GTAP has been extended to represent the above policy instruments and structural features • Using complementarity feature of GEMPACK (beta-vers. 8.0) • Data: GTAP version 5. Aggregation: 12 commodities • (6 prim. agric., 2 proc. food) and 19 regions • (Vietnam data is a 1997 IO table contributed by author) • Supplemented by external price, trade and TRQ data

  4. 1. Rice export quota and fertilizer import quota Rice export quota is represented as a global export quota, i.e. trigger mechanism is aggregate export flow The functioning of the export quota Introduce new price Px and redefine Pfob Complementarity statement lets us trace whether quota is binding or not External price data: Fertilizer import quota is represented using TRQ module (Elbehri and Pearson 2000) External price data:

  5. 2. Restrictions on land allocation a. Land re-allocation plans to diversify Viet. agric. Convert 5% of paddy land to alternative uses Land allocation in model amended to enable exog. shift of land out of paddy and endog. distribution among other agriculture b. Quantification of restrictions on land mobility is difficult, very little information available Represented such that land allocation across sectors is more sluggish in Vietnam than in other countries/regions Region-specific elasticity of substitution introduced T = -0.01 for Vietnam and default T = -1.00 for others

  6. 3. Preferential access agreements of the EU • The EU provides preferential access to: • Thailand • USA • Australia • Guyana (ACP) • OCT • India • Pakistan 40% of EU imports enter on preferential terms TRQs Rice is an exception to the EU’s Everything But Arms initiative. Vietnam is not classified as an LDC. Tariff rebates

  7. Selected production, trade and price results for Vietnam, % change

  8. Welfare results for Vietnam, % change Conclusions • The rice export quota has been a strong regulatory tool that has kept Vietnamese rice production & exports well below potential. • The simultaneous removal of the fertilizer import quota has been a correct policy action, improving allocative efficiency. • Land mobility restrictions are a serious constraint on rice production and exports. • The attempt to ‘control’ agricultural diversification through land re-allocation comes at the cost of reduced allocative efficiency. • Vietnam has so little initial trade with the EU that levelling the playing field will not increase Vietnamese rice exports much. • Providing Vietnam with preferential access similar to that of e.g. India will have a significant impact on Vietnamese-EU rice trade.

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