Agricultural Policy Monitoring and Evaluation 2021

30. Viet Nam

Support to agriculture

Support provided to Viet Nam’s agricultural sector fluctuates at low and negative levels, largely driven by changes in market price support (MPS). In 2018-20, Viet Nam’s producer support estimate (PSE) was -9.2%, implying an implicit overall taxation compared to the positive level of support in 2000-02. MPS varies across commodities. Producers of import-competing commodities, such as maize, sugar cane and beef, benefit from tariff protection, while producers of cashew nuts, pig and poultry meats, pepper, coffee, tea, and rubber are implicitly taxed. Rice producers also benefit from price support based on target prices designed to provide farmers with a profit of 30% above average production cost.1 In some years, this system results in implicit taxation of rice producers when domestic prices are below international levels. On average during 2018-20, effective prices received by farmers were 9% lower than world prices, though this hides large differences between commodities.

Budgetary transfers to producers are relatively small and include payments based on variable input use – primarily expenditure to subsidise an irrigation fee exemption and direct payments to rice producers tied to maintaining land in rice production.

Support for general services for agriculture (GSSE) was equivalent to 2.5% of agricultural value-added in 2018-20, down from 2.9% in 2000-02. Expenditure to develop and maintain infrastructure, in particular irrigation, dominates support for general services. Total support to agriculture (TSE) varies between positive and negative values, as in some years budgetary transfers to producers and expenditure on general services do not compensate for overall negative MPS.

Recent policy changes

In 2020, the Ministry of Agriculture and Rural Development (MARD) approved its Plan to Implement the Paris Agreement on Climate Change for the period 2021-30. It sets out tasks for the sector to implement the government’s 2016 action plan for the agreement. Key tasks for MARD include reducing greenhouse gas (GHG) emissions in the agriculture and rural development sector; and establishing measurement, reporting and verification systems (MRV) for the agricultural sector and the land use, land use change and forestry (LULUCF) sectors. The government also promulgated the National Climate Change Adaptation Plan for 2021-30, with a Vision to 2050, which aims to minimise vulnerability to and risk of climate change impacts by strengthening the adaptability of communities, economic sectors and ecosystems. For the agricultural sector, the plan identifies adaptation needs, objectives and tasks.

Since 2003, most farming households and organisations are exempt from paying agricultural land use tax or benefit from a land tax reduction. In June 2020, the government issued a Resolution extending the exemption until 31 December 2025.

In 2020, Viet Nam signed the Regional Comprehensive Economic Partnership (RCEP or ASEAN+5) and the United Kingdom-Viet Nam Free Trade Agreement (UKVFTA). RCEP combines and deepens existing bilateral and regional agreements, and will be the largest free trade agreement in the world once in force, covering around 30% of both global population and GDP. UKVFTA was negotiated based on commitments from the original agreement with the European Union (EVFTA) with necessary adjustments to ensure compliance with the bilateral trade framework between Viet Nam and the United Kingdom. The Agreement came into effect on 31 December 2020. (EVFTA entered into force on 1 August 2020.)

Viet Nam allowed enterprises, individuals and household businesses affected by the COVID‑19 pandemic to defer payment of value-added tax, corporate income tax, personal income tax, and land rental fees. Enterprises, organisations, households and individuals engaged in agricultural, forestry and fishery production, and food production and processing, are among those eligible to defer payments of tax and land rent.

Also in response to the COVID‑19 pandemic, in order to stabilise the domestic market, on 11 March 2020 the government ordered private rice traders to maintain rice reserves equivalent to 5% of the volume shipped in the preceding six months. On 25 March 2020, the government suspended rice exports in order to ensure domestic food security during the COVID-19 outbreak and in the context of a severe drought in the Mekong River Delta. The decision was subsequently revised in favour of a monthly quota for rice exports and, on 3 April 2020, the government approved a plan to export 400 000 tonnes of rice in April and a further 400 000 tonnes in May.

On 27 March 2020, Viet Nam announced a plan to stockpile 270 000 tonnes of rice, including 80 000 tonnes of paddy (unhusked) rice, to ensure domestic food availability during the COVID-19 pandemic. The Ministry of Finance was directed to buy 190 000 tonnes of rice and 80 000 tonnes of paddy rice from the domestic market.

Assessment and recommendations

• Viet Nam’s deeper integration into the global economy, including through trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and EVFTA, brings the agricultural sector opportunities to expand and diversify exports and markets. But these agreements also pose challenges to domestic producers, such as increased competition from imports as agro-food tariffs are reduced and the requirement to meet stringent food hygiene, safety and technical standards in export markets.

• Further efforts are needed to improve the sector’s competitiveness and environmental sustainability. Most easy ways of increasing production – expanding agricultural land area and using higher rates of fertilisers – are fully exploited, and negative environmental impacts are increasing. While these are challenges for Viet Nam, they also open opportunities to adopt new technologies, create incentives for farm consolidation to increase the scale of production, and focus on improving quality.

• To improve the allocation of scarce land resources, farm consolidation could be encouraged, including various forms of co-operation between farmers, and restrictions on crop choice should be removed. This can help small-scale farming households connect to market opportunities and participate in value chains.

• To improve the competitiveness and quality of Viet Nam’s rice exports, reforms could consider further easing restrictions on rice exporters, in particular deregulating the export floor price. The current system risks cutting off potentially profitable rice exports and creates uncertainty around export transactions if the minimum export price is likely to change.

• The low cost of water exacerbates overuse and increases the agricultural sector’s vulnerability to drought. While re-introducing a fee for irrigation services is a positive step, a fee based on unit of water rather than on area or crop type, as previously applied, would encourage greater water use efficiency.

• Viet Nam has committed to reduce GHG emissions by 8% between 2021 and 2030 compared to business-as-usual (BAU) levels using domestic resources. The government has set the target of reducing GHG emissions in agriculture and rural areas by 20% every 10 years through crop and animal husbandry practices, including climate-smart agriculture practices.

Figure 30.1. Viet Nam: Development of support to agriculture

Note: * Share of potentially most distorting transfers in cumulated gross producer transfers.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 30.2. Viet Nam: Drivers of the change in PSE, 2019 to 2020

Note: The producer price change and the border price change are not calculated when the negative price gap occurs at the commodity level for the current or previous year.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Figure 30.3. Viet Nam: Transfer to specific commodities (SCT), 2018-20

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Statlink

Table 30.1. Viet Nam: Estimates of support to agriculture

Million USD

	2000-02	2018-20	2018	2019	2020p
Total value of production (at farm gate)	8 570	38 652	38 550	38 357	39 047
of which: share of MPS commodities (%)	82.3	76.3	75.3	70.9	82.8
Total value of consumption (at farm gate)	7 443	36 394	34 802	36 248	38 131
Producer Support Estimate (PSE)	461	-3 586	-4 337	-4 027	-2 393
Support based on commodity output	340	-4 097	-4 762	-4 572	-2 957
Market Price Support1	340	-4 097	-4 762	-4 572	-2 957
Positive Market Price Support	901	1 517	1 329	1 273	1 949
Negative Market Price Support	-562	-5 614	-6 091	-5 845	-4 905
Payments based on output	0	0	0	0	0
Payments based on input use	101	423	336	456	476
Based on variable input use	101	422	335	456	475
with input constraints	0	0	0	0	0
Based on fixed capital formation	0	0	0	0	0
with input constraints	0	0	0	0	0
Based on on-farm services	0	0	0	0	0
with input constraints	0	0	0	0	0
Payments based on current A/An/R/I, production required	0	89	90	88	88
Based on Receipts / Income	0	2	2	2	2
Based on Area planted / Animal numbers	0	87	88	86	86
with input constraints	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	0	0	0	0	0
With variable payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
With fixed payment rates	0	0	0	0	0
with commodity exceptions	0	0	0	0	0
Payments based on non-commodity criteria	21	0	0	0	0
Based on long-term resource retirement	21	0	0	0	0
Based on a specific non-commodity output	0	0	0	0	0
Based on other non-commodity criteria	0	0	0	0	0
Miscellaneous payments	0	0	0	0	0
Percentage PSE (%)	5.2	-9.2	-11.1	-10.4	-6.0
Producer NPC (coeff.)	1.04	0.91	0.90	0.90	0.94
Producer NAC (coeff.)	1.06	0.92	0.90	0.91	0.94
General Services Support Estimate (GSSE)	206	870	762	906	942
Agricultural knowledge and innovation system	23	96	91	94	104
Inspection and control	4	3	3	3	3
Development and maintenance of infrastructure	173	723	620	762	787
Marketing and promotion	1	1	1	1	1
Cost of public stockholding	5	46	47	45	46
Miscellaneous	0	0	0	0	0
Percentage GSSE (% of TSE)	31.2	..	..	..	..
Consumer Support Estimate (CSE)	-549	340	1 294	77	-351
Transfers to producers from consumers	-551	2 050	2 322	1 963	1 866
Other transfers from consumers	-20	-2 082	-1 326	-2 267	-2 652
Transfers to consumers from taxpayers	0	0	0	0	0
Excess feed cost	22	371	298	381	435
Percentage CSE (%)	-7.3	0.9	3.7	0.2	-0.9
Consumer NPC (coeff.)	1.08	1.00	0.97	1.01	1.02
Consumer NAC (coeff.)	1.08	0.99	0.96	1.00	1.01
Total Support Estimate (TSE)	667	-2 716	-3 575	-3 121	-1 451
Transfers from consumers	571	31	-996	304	786
Transfers from taxpayers	117	-665	-1 253	-1 158	415
Budget revenues	-20	-2 082	-1 326	-2 267	-2 652
Percentage TSE (% of GDP)	2.0	-1.1	-1.5	-1.2	-0.5
Total Budgetary Support Estimate (TBSE)	328	1 381	1 188	1 451	1 506
Percentage TBSE (% of GDP)	1.0	0.5	0.5	0.6	0.6
GDP deflator (2000-02=100)	100	399	396	403	..
Exchange rate (national currency per USD)	15 000.33	23 161.93	23 023.21	23 226.28	23 236.30

.. Not available

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Viet Nam are: rice, rubber, coffee, maize, cashew nuts, sugar, pepper, tea, beef and veal, pig meat, poultry and eggs.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

A long series of reforms since the late-1980s have progressively liberalised Viet Nam’s agricultural sector.2 Agricultural reforms were embedded into the economy-wide programme of reforms (Doi Moi) initiated in 1986, which transformed Viet Nam from a centrally planned to a socialist-oriented market economy. Prior to these, agriculture’s primary role was to support Viet Nam’s industrialisation by providing food at low prices. Agricultural production was organised around co-operatives and state farms, with state-owned enterprises providing inputs and controlling output markets. Under the new policy framework, agriculture was elevated to primary importance. The focus of agricultural management moved from co-operatives to farm households, with farmland redistributed in the form of land use rights3 and farm households given the ability to make their own production decisions provided they met certain quotas. Broader reforms opened the market to both greater domestic and international competition.

From the early 1990s, reforms introduced more market-oriented policies with the aim of expanding food production for export to generate foreign exchange earnings. A number of these reforms aimed to improve investment and technological innovation, including the establishment of a national extension service and credit facilities for farmers. Production quota obligations were removed and regulatory barriers to trade were gradually lifted. Viet Nam also entered into a large number of bilateral and regional trade agreements and partnerships to expand market opportunities.4 The improved policy environment was supported by a rapid increase in budgetary expenditure, including on irrigation infrastructure. At the same time, a Price Stabilisation Fund was created to stabilise the prices of essential commodities including urea, paddy and rice, coffee, and sugarcane.

From 2000, the policy framework aimed to stimulate agricultural and rural modernisation and industrialisation by improving yields, quality and the value of production. Further international integration at the bilateral, regional and multilateral level locked in previous reforms and motivated further actions. The remaining few quantitative restrictions on agricultural imports and exports were removed.

Since 2008, two major resolutions guide agricultural policy development. Resolution No. 26/2008/NQ-TD (the Tam Nong resolution) emphasises agricultural and rural development based on the market economy with socialist orientation. Resolution No. 63/2009/NQ-CP seeks to ensure national food security by guaranteeing adequate food supplies, particularly for rice. These resolutions are implemented through a number of policy documents. This includes the Agricultural Restructuring Plan, which promotes the restructuring of the agricultural sector towards improving value-added and sustainable development; and the Agricultural Restructuring Plan 2017-2020, which aims to sustainably develop agriculture and rural areas; increase value-added, efficiency and competitiveness; and improve the life of farmers, contribute to poverty reduction, protect the environment and ecology, and ensure national security.5

Table 30.2. Viet Nam: Agricultural policy trends

Period	Framework	Changes in agricultural policies
1976-1986	Reunification: Socialist centrally planned system	Centrally planned economy, including the agricultural sector Agricultural production organised into co-operatives that also administered land Upstream and downstream sectors reorganised as state-owned enterprises
1986-1993	Renovation (Doi Moi): Launch of reforms to transition Viet Nam to a socialist-oriented market economy	Farm households replace co-operatives as focus of agricultural and rural development Role of co-operatives reduced: farmers allowed to make production decisions; co-operatives limited to trading and providing services (e.g. irrigation) Economy opened to trade Reduced government control over prices, although prices regulated for some products (including fertiliser, sugar and rice)
1993-2000	Expansion: Further reforms to expand food production and exports	Land Law 1993; land use rights extended to 20 years (annual crops) and 50 years (perennial crops) Land use tax replaces production quota and agricultural output tax Rural households allowed to borrow loans from commercial institutions Price Stabilisation Fund for essential commodities Restrictions on rice exports relaxed Increased budgetary expenditure for agriculture
2000-2008	Consolidation: Policies to promote agricultural and rural modernisation and industrialisation	Policies to encourage production of primary and processed commodities, quality improvement, domestic and international trade, and increase investments from various sources in physical and social infrastructure Regional and bilateral trade agreements WTO accession
2008-present	Reorientation: Shift in emphasis from extensive development of agriculture based on quantity to one focused on quality and efficiency improvements	Agricultural policy guided by two major resolutions: - Resolution No. 26/2008/NQ-TW on agriculture, farmers and rural areas (Tam Nong) - Resolution No. 63/2009/NQ-CP to ensure national food security Implemented by the Agricultural Restructuring Plan and the Agricultural Restructuring Plan 2017-2020

Source: OECD (2015[1]).

Over the past 20 years, the overall level of support provided to Viet Nam’s agricultural sector fluctuated at low or negative levels, largely driven by changes in market price support (MPS). Total support to agriculture (TSE) varies between positive and negative values, as in some years budgetary transfers to producers and expenditure on general services do not compensate for overall negative MPS.

Figure 30.4. Viet Nam: Level and PSE composition by support categories, 2000 to 2020

As a percentage of gross farm receipts

Note: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

Domestic price support is the main form of support for Vietnamese producers, with border protection being the main tool used. Domestic price support varies across commodities. In particular, tariffs protect producers of import-competing commodities, such as beef and veal, and sugar cane. Producers of export commodities, such as natural rubber, coffee, cashew nuts and tea are implicitly taxed in that they receive prices lower than world prices for their outputs. As a result, total MPS is the sum of positive and negative support. Farm gate rice prices are supported by a subsidy to rice purchasing enterprises for the temporary storage of rice during harvest, and by target prices that vary between regions and crop season, with the objective of providing farmers a profit of 30% above production cost.

Payments to producers are relatively small. Expenditure associated with subsidising the irrigation fee exemption is the dominant form of budgetary support. An area payment has been provided since 2012 with the objective of keeping 3.8 million hectares in paddy rice production. Since 2016,6 rice growers receive VND 1 million (USD 43)/ha/year for land under wet paddy cultivation, and VND 500 000 (USD 22)/ha/year for other rice land, except upland fields not under paddy land-use plans.7 Rice growers also receive support when land is reclaimed for rice cultivation, amounting to VND 10 million (USD 430)/ha/year, except for upland fields, and VND 5 million (USD 215)/ha/year for wet-paddy land reclaimed from one-crop paddy land or other crop land.

Other support programmes based on input use include those that provide plant genetic and animal breeding material to farmers at subsidised rates. At the national level, these are often part of a package for farmers recovering from natural disasters or disease outbreaks. Since 2009, a number of policy packages were introduced to provide farmers subsidised credit to purchase inputs and assets for agricultural production (fertilisers, pesticides, machinery and equipment). Since 2003, most farming households and organisations are exempt from paying agricultural land use tax or benefit from a land tax reduction.

Expenditures on irrigation systems dominate general services for the agricultural sector. Expenditures on other forms of general services, such as extension services, research and development, inspection and control, and marketing and promotion are relatively limited.

All land is owned and administered by the state on behalf of the people. Farmers have land user rights, and benefit from a wide range of rights, including the right to rent, buy, sell and bequeath land, and to use land as collateral for mortgages with financial institutions. However, there are restrictions on land use including the duration of land use rights, land areas per household, the choice of crops, the process for converting paddy land from rice to another crop, and land transfers and exchanges.

Until 2016, the government maintained a large degree of control over rice exports. Exporters had to meet specific milling and storage requirements, the minimum export price had to be respected (to limit price declines), and certain administrative functions were given to the Viet Nam Food Association (VFA). However, in January 2017, in line with the Investment Law of 2014, Viet Nam’s Ministry of Industry and Trade (MOIT) abolished Decision No. 6139/2013/QD-BCT, which capped the number of rice exporters at 150 and stipulated strict conditions for becoming a rice exporter. In 2018, the government further relaxed export conditions on rice.8 To be eligible to export rice, companies must have at least one storage and one milling facility that meet national standards and regulations, which can be owned or leased. Traders must also maintain rice reserves equivalent to 5% of the volume shipped in the preceding six months.

Following Viet Nam’s accession to the WTO in 2007, the simple average Most Favoured Nation (MFN)-applied tariff on agricultural imports decreased from around 25% in the mid-2000s to 17.2% in 2019, compared with a simple average bound tariff on agricultural products of 18.8% (WTO, 2021[2]). Applied tariffs are much lower on imports originating from countries or regions with which Viet Nam signed free trade agreements. For example, the average tariff is just 3.4% on agricultural imports from ASEAN members and 5.4% from the People’s Republic of China (hereafter “China”).

Since joining the World Trade Organisation (WTO) in 2007, Viet Nam progressed towards implementing the requirements of the Sanitary and Phytosanitary Agreement. However, the regulatory regime still suffers from limited enforcement capacity, poor co-ordination and a large number of overlapping regulations.

Viet Nam implements trade liberalisation through multilateral, regional and bilateral trade agreements. It is a member of the WTO, Association of Southeast Asian Nations (ASEAN) and Asia-Pacific Economic Cooperation (APEC), and supports trade liberalisation between ASEAN members and their major trading partners in the region, including China, Japan, India, Korea, Australia and New Zealand.

Viet Nam’s 2011 National Strategy on Climate Change tasks the agricultural sector with reducing greenhouse gas (GHG) emissions by 20% every ten years, while increasing gross production by 20% and reducing the poverty rate by 20% (Decision 2139/QD-TTg). The Ministry of Agriculture and Rural Development (MARD) subsequently issued an action plan to adapt to and mitigate climate change in the agricultural sector, most recently in Decision No. 819/QD-BNN-KHCN. The action plan prioritises: research on selection and production of plant varieties and animal breeds to minimise GHG emissions and adapt to climate change; minimum tillage and techniques to reduce water use and fertilisers to minimise methane gas emissions in rice fields; and increasing production of bioenergy crops. MARD also approved a programme to reduce GHG emissions in the crop, livestock, fishery and forestry sectors, and in irrigation and rural industries by 2020, while enhancing economic growth and reducing poverty (Decision No. 3119/QD-BNN-KHCN). The programme aimed to: reduce GHG emissions in agriculture and rural areas by 20%; ensure that 3.2 million hectares of rice apply advanced methods, such as the System of Rice Intensification and Alternative Wetting and Drying (AWD); and promote more efficient use of agricultural inputs.

Viet Nam ratified the Paris Agreement on Climate Change in 2016. Viet Nam’s Nationally Determined Contribution (NDC) commits to reduce GHG emissions by 8% between 2021 and 2030 compared to Business-as-Usual (BAU) levels using domestic resources, and up to 25% conditional on receiving international support. Decision 2053/QD-TTg (28 October 2016) outlines the Action Plan to Implement the Paris Agreement on Climate Change and includes activities for adaptation and mitigation in the agricultural sector.

Policies for the agricultural and rural development sector also affirm the commitment to reduce agricultural GHG emissions. In 2017, MARD issued Decision No. 932/QD-BNN-KH approving the Green Growth Action Plan of the agriculture and rural development sector for the period 2016-2020. This plan prioritises ten tasks and policy measures to reduce GHG by 20% in 2020, compared with the BAU scenario. Key activities include applying organic farming; efficient use of agricultural inputs; short duration, high quality rice varieties; water saving practices (alternate wetting and drying – AWD); climate smart agriculture (CSA) practices; integrated crop management practices to reduce GHG emissions from rice and crop production; and enhancing animal feed mixing and animal waste (biogas) and crop residues management to reduce CH4 and other GHG emissions. The 2018 laws on Crop Production and Animal Husbandry (OECD, 2019[3]) also identify a role for research and development to help the sector adapt to climate change and mitigate GHG emissions.

Domestic policy developments in 2020-21

On agricultural and rural development, in October 2020, the government approved the strategy to industrialise, modernise and sustainably develop livestock production in Viet Nam. The Livestock Development Strategy for the Period 2021-2030, with a Vision for 2045 (Decision No. 1520/2020/QD-TTg) aims to achieve annual growth in the value of livestock production of 3-4% during the period 2026-2030, with specific targets for pork, poultry meat, beef, dairy and eggs production. The strategy also aims to establish disease-free livestock production areas, and includes targets for improving the productivity and quality of livestock breeds; improving quality and lowering prices for animal feed; raising capacity for slaughtering and processing of livestock products; and developing supporting industries for livestock production. These targets are to be achieved through land allocation; preferential support, including access to finance and credit; extension; and investments and international co-operation in research and development.

In 2019, the government issued Resolution No. 53/NQCP on measures to encourage and facilitate businesses to invest in agriculture in an effective, safe and sustainable manner (OECD, 2020[4]). Based on this Resolution, in December 2020 MARD approved the Plan to promote investment in the agricultural and rural sector in the period of 2021-25 (Decision No. 5227/2020/QD-BNN-KH). The plan clarifies the tasks to promote business investment, which include:

• Research into and evaluation of market potentials, trends and investment partners, including in traditional trading partners, as well as countries that are members of the Comprehensive and Progressive Agreement for a Trans Pacific Partnership (CPTPP), the EU-Vietnam Free Trade Agreement (FTA), and the Regional Comprehensive Economic Partnership (RCEP).

• Digitising and building a database on investment promotion activities; establishing a list of projects calling for investment (including in the cropping and livestock industries, agriculture using high technology, and organic agriculture).

• Developing publications and material to promote investment; training and capacity building on investment promotion.

• Providing support to enterprises and investors (including support for consultancies, agricultural enterprise start-ups, and use of geographic indicators).

• Promoting domestic and international co-operation on investment promotion.

In March 2020, the government approved the Master Programme on Sustainable Agricultural Development and Adaptation to Climate Change in the Mekong River Delta (MRD) to 2030, with a Vision to 2045 (Decision No. 324/2020/QD-TTg). The Master Programme establishes economic, social and environmental targets for the agricultural and rural sector in the MRD, and solutions to achieve those targets. These include reviewing and adjusting regional and provincial development plans in the direction of sustainable transformation and climate change adaptation; the application of science and technology; and capacity building for natural resource and environmental management.

The government approved the research and development programme for plant and livestock varieties serving agricultural restructuring for the period 2021-30 (Decision No. 703/2020/QD-TTg). The programme aims to improve research capacity and the production of agricultural plant and livestock varieties to support the modernisation of the agricultural sector, adaptation to climate change, and the restructuring of agricultural production to improve competitiveness, increase value-added and promote sustainable development. Specific tasks include enhancing the science and technology for developing seeds, developing capacity to produce seed, and improving research infrastructure for seed variety research and production. Total investment in the programme is VND 103 050 billion (USD 4.4 billion) over the period 2021-30, including private funding.

The government also approved the Scheme for Developing Organic Agriculture in the Period 2020-2030 (Decision No. 885/2020/QD-TTg). The scheme sets out specific goals for increasing the share of organic production in agricultural production, including for key crops, in livestock and aquaculture production, and for improving the value per hectare of organic production by 2025 and 2030. By 2025, organic agriculture is to account for 1.5-2% of the total agricultural area (and 2.5-3% by 2030); over 1% of the cultivated area for major crops including rice, fruit and vegetables, tea, pepper, coffee, cashew nuts and coconut (2% by 2030); and 1-2% of domestically produced livestock products (2-3% by 2030). In addition, by 2025 the value per hectare of organic production is to be 1.3 to 1.5 times higher than non-organic production (1.5 to 1.8 times higher by 2030). Other goals include: diversifying how organic production is organised, including linkages between agricultural co-operatives and enterprises in the production and processing of organic products to create large-scale production areas; the application of technology in organic agriculture; promoting processing, consumption and exports of organic products; developing certification bodies and a system of standards for organic production; research and development on organic agriculture; and human resources training.

On irrigation, in January 2020 the government approved Viet Nam’s irrigation strategy to 2030, with a vision to 2045 (Decision No. 33/2020/QD-TTg), which establishes water supply targets for agricultural production and aquaculture, among other objectives, such as ensuring the supply of water for double-cropping paddy rice fields, and ensuring that 85% of the total area is under irrigation. By 2030, 30% of the total area should be cultivated with advanced methods, and 60% by 2050. Other targets in the irrigation strategy are improving drainage and environmental protection, and preventing and combating natural disasters, and responding to climate change, including by responding to drought, saltwater intrusion, floods, and riverbank and coastal erosion. Targets in the strategy will be achieved through a combination of investments in irrigation infrastructure, improved planning and management of irrigation laws, and technical solutions.

On direct support to rice growers, in 2019, the government issued a Decree that replaced the direct area-based payments to rice growers with increased funding for local support programmes that aim to protect land for rice cultivation (Decree No. 62/2019/ND-CP).9 Under the Decree, at least 50% of funds available to support rice growers are to be used to support the adoption of new rice varieties, new technologies in rice production, and to promote value chain linkages for the production and sale of rice. Remaining funds are to be used for activities such as periodic soil analyses to guide restoration measures, making improvements to land quality, and investments in agricultural and rural infrastructure. Local authorities can determine the form of support provided based on local needs.

On land tax, most farming households and organisations are exempt from paying agricultural land use tax or benefit from a land tax reduction.10 In June, the government issued a Resolution extending the exemption to 31 December 2025 (Resolution No. 107/2020/QH14). The exemption had been due to expire on 31 December 2020.

On agricultural regulation, in 2019 the government banned the use of glyphosate from 10 June 2020, removing glyphosate-based herbicides from the list of plant protection agrochemicals permitted for use in Viet Nam (OECD, 2020[4]). In September 2020, MARD issued a circular under which glyphosate-based herbicides may be sold and used until 30 June 2021 (Circular No. 10/2020/TT-BNNPTNT). Under the same circular, agrochemicals containing Chlorpyrifos-ethyl and Fipronil cannot be produced or imported, but may be sold and used until 12 February 2021.

In response to natural disasters in 2020, the government provided paddy, maize and vegetable seeds from national reserves to four provinces – Quang Tri, Quang Binh, Ha Tinh and Thanh Hoa – that were affected by landslides and flooding following tropical storms and cyclones in October (Decision No. 2144/2020/QD-TTg).

In response to African swine fever in 2019-2020, the government provided financial support to pig producers having pigs infected by African swine fever and destroyed. The support level was VND 25 000 (USD 1.07)/kg to VND 30 00 (USD 1.29)/kg for live pigs in 2019, and VND 30 000 (USD 1.29)/kg to VND 35 00 (USD 1.51)/kg for live pigs in 2020. For small and medium-sized livestock enterprises, the level of support was VND 8 000 (USD 0.34)/kg to VND 10 000 (USD 0.43)/kg in 2019, and VND 10 000 (USD 0.43)/kg to VND 12 000 (USD 0.52)/kg in 2020. Total support should not exceed 30% of total loss due to the disease.11

On natural resource management, in 2020 the government approved VND 530 billion (USD 22.8 million) in financial support to prevent and combat drought, water shortages and salinisation in eight provinces in the MRD, including the impacts on agriculture (Ben Tre, Long An, Tien Giang, Ca Mau, Kien Giang, Soc Trang, Tra Vinh and Bac Lieu) (Decision No. 504/2020/QD-TTg). The funding will be used to implement urgent measures such as pumping water; dredging canals and ditches, and building temporary dams to prevent salinity to maintain fresh water; and digging ponds and wells for storing fresh water.

On climate change, in March 2020, MARD approved its Plan to implement the Paris Agreement on Climate Change for the period of 2021-2030 (Decision No. 891/2020/QD-BNN-KHCN). The Decision sets out the tasks for the sector to implement the government’s 2016 action plan to implement the Paris Agreement on Climate Change,12 which set out compulsory, prioritised and encouraged tasks for MARD, where the three compulsory tasks are to:

• Implement GHG emission reduction in the agriculture and rural development sector in order to implement the NDC in accordance with national conditions on the basis of a periodic review of global efforts.

• Establish a Measurement, Reporting and Verification System (MRV) for sector-level GHG emission reduction activities in the land use, land use change and forestry (LULUCF) sectors.

• Establish a MRV System for sector-level GHG emission reduction activities in the agricultural sector.

Solutions to implement the tasks include human resources training and capacity building; reviewing and adjusting mechanisms, policies, and sectoral plans in accordance with the Paris Agreement on Climate Change; applying scientific and technological solutions; international co-operation; and mobilising financial resources, including in the form of public-private partnerships with domestic and foreign businesses.

Also on climate change, in July the government promulgated the National Climate Change Adaptation Plan for 2021-2030, with a Vision to 2050 (Decision No. 1055/2020/QD-TTg), which aims to minimise vulnerability and the risk of climate change impacts by strengthening the adaptability of the community, economic sectors – including agriculture – and ecosystems. For the agricultural sector, the plan identifies adaptation needs, objectives and tasks. Identified adaptation needs in the agricultural sector include: improving the resilience of the agricultural sector through revising and completing laws and policies, and providing training and improving capacity; adjusting farming plans, arranging crop structures and scaling-up appropriate models for improving the effectiveness of agricultural land use and climate change adaptation; and improving the resistance of plants and livestock to disease and pests under climate change impacts. Funding to implement the plan will be sourced from the state budget, and from funding for implementing adaptation actions in the national target programmes and other programmes and projects.

On food security, in December 2020 the government issued a Decision on the Action Plan to implement the Politburo’s Conclusion No. 81-KL/TW dated 29 July 2020 on “Ensuring national food security to 2030” (Decision No. 1975/2020/QD-TTg). The main tasks of the Plan are to: raise awareness about national food security; reorganise production, including by promoting mechanisation, linkages in the processing and sale of agricultural products, and large-scale production areas; improve people’s ability and access to safe and nutritious food, including by upgrading and modernising transport and irrigation infrastructure and developing a food security information system; and improve institutions and policies to ensure national food security, including mechanisms and policies on land, investment, finance, credit and trade to provide adequate support to farmers, rice production and business enterprises.

Domestic policy responses to the COVID-19 pandemic

On agricultural and agro-food supply chain policies implemented in response to the COVID-19 pandemic, Viet Nam allowed enterprises, individuals and household businesses affected by the COVID-19 pandemic to defer payment of value added tax, corporate income tax, personal income tax, and land rental fees. Enterprises, organisations, households and individuals engaged in agricultural, forestry and fishery production, and food production and processing, are among the subjects that are eligible to defer payments of tax and land rent.13

At the national level, the government also issued a number of policies to support enterprises, households and individuals facing difficulties caused by the COVID-19 pandemic, which were amended and supplemented during 2020.14 These policies provided support to household businesses, employers and employees, including enterprises engaged in agricultural production and/or food production or processing.

Trade policy developments in 2020-21

The European Union-Viet Nam Free Trade Agreement (EVFTA) entered into force on 1 August 2020 after the agreement was approved by the Vietnamese National Assembly on 8 June 2020. Under the terms of the agreement, the European Union will progressively phase out duties for most products over a period of seven years, while Viet Nam will reduce tariffs on EU goods over ten years. The European Union established duty-free tariff rate quotas (TRQs) for a variety of Vietnamese agricultural imports under the agreement: 30 000 tonnes of milled rice; 20 000 tonnes of husked rice and 30 000 tonnes of fragrant rice, as well as quotas for sweet corn, garlic, mushrooms, sugar and manioc starch. The tariff on broken rice will be phased out over five years, starting with a 50% cut. Viet Nam will progressively eliminate duties for EU products –beef and olive oil will be liberalised over three years; dairy, fruit and vegetables will be liberalised over five years; frozen pork meat, food preparations and wine will be liberalised over seven years; and chicken and beer will be liberalised after ten years. At the end of the implementation period, an average tariff of 1.1% will apply to agricultural goods originating in Viet Nam and 2.1% to processed agricultural products while the average tariff for EU agricultural exports will be 2.6%. Viet Nam will also recognise and protect 169 EU geographical indications (GIs), while 39 Vietnamese GIs will be recognised and protected in the European Union

On 15 November 2020, the Association of Southeast Asian Nations (ASEAN)15 and the five states with which ASEAN has existing free trade agreements – Australia, China, Japan, Korean and New Zealand – signed the Regional Comprehensive Economic Partnership (RCEP or ASEAN+5). RCEP combines and deepens a number of existing bilateral and regional agreements, and once in force, it will be the largest free trade agreement in the world covering around 30% of both the global population and its GDP. The RCEP Agreement will enter into force 60 days after six ASEAN Member States and three non-ASEAN Member States have ratified the Agreement. RCEP is expected to unlock more export markets for Vietnamese agricultural products.

On 29 December 2020, the Viet Nam-United Kingdom Free Trade Agreement (UKVFTA) was signed. The Agreement was negotiated based on the principle of inheriting commitments in EVFTA with the necessary adjustments to ensure compliance with the bilateral trade framework between Viet Nam and the United Kingdom. The Agreement came into effect on 31 December 2020.

In May 2020, the government of Viet Nam issued a decree revising Most Favoured Nation (MFN) tariff rates on a number of agricultural products (Decree 57/2020/ND-CP). The Decree entered into force on 10 July 2020. MFN tariff rates were reduced for dairy products, ethanol, almonds, apples, grapes, wheat, walnuts, frozen potatoes, raisins, and chilled pork. A temporary reduction for frozen pork until 31 December 2020 was also issued.

Trade policy responses to the COVID-19 pandemic

In response to the COVID-19 pandemic, on 11 March 2020, the government ordered private rice traders to maintain rice reserves equivalent to 5% of the volume shipped in the preceding six months, in order to stabilise the domestic market. On 25 March 2020, the government suspended rice exports in order to ensure domestic food security during the COVID-19 outbreak and in the context of a severe drought in the Mekong River Delta. The decision was subsequently reversed in favour of setting a monthly quota for rice exports, and on 3 April 2020, the government approved a plan to export 400 000 tonnes of rice in April, and a further 400 000 tonnes in May.

On 27 March 2020, Viet Nam also announced that it planned to stockpile 270 000 tonnes of rice, including 80 000 tonnes of paddy (unhusked) rice, to ensure domestic food availability during the COVID-19 pandemic. The Ministry of Finance was directed to buy 190 000 tonnes of rice and 80 000 tonnes of paddy rice.

Contextual information

Viet Nam is a mid-size country in terms of area, but its population of 96 million makes it the 15^th most populous country in the world. Around two-thirds of the population live in rural areas. Since the mid-1980s, a long series of reforms have moved the economy, including the agricultural sector, in the direction of open markets for trade and investment, private sector decision-making, private land use rights, and a greater role for private firms. These reforms resulted in rapid, stable and inclusive economic growth, transforming Viet Nam from one of the world’s poorest nations to a lower middle-income country, and contributing to significant reductions in poverty rates and improvements in other social outcomes, including in rural areas.

The agricultural sector in Viet Nam has undergone significant structural changes in recent decades, reflecting a shift away from staple foods to export commodities, in particular perennial crops such as rubber and cashew nuts, and to livestock production, in particular pig meat. Nevertheless, crops dominate with rice accounting for around 26% of the value of agricultural production. Agricultural production has more than tripled in volume terms since 1990. While the relative importance of agriculture in the economy has declined over time, agriculture remains an important sector, contributing 14% to Viet Nam’s GDP and employing 37% of the labour force.

The agro-food sector is well integrated with international markets. Agro-food exports have increased eight-fold since the early 2000s, and Viet Nam is now one of the world’s largest exporters of a wide range of agricultural commodities, including cashews, black pepper, coffee, cassava and rice. Two-thirds of Viet Nam’s agro-food exports are delivered to foreign consumers without further processing. Agro-food imports have also increased significantly. The majority of agro-food imports form intermediate inputs into Viet Nam’s processing sectors (Figure 30.6).

Table 30.3. Viet Nam: Contextual indicators

	Viet Nam		International comparison
	2000*	2019*	2000*	2019*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	159	808	0.4%	0.7%
Population (million)	80	96	1.9%	1.9%
Land area (thousand km2)	310	310	0.4%	0.4%
Agricultural area (AA) (thousand ha)	8 780	12 169	0.3%	0.4%
			All countries1
Population density (inhabitants/km2)	258	311	53	63
GDP per capita (USD in PPPs)	1 987	8 374	9 265	21 975
Trade as % of GDP	49	100	12.3	14.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	22.7	14.0	2.9	3.5
Agriculture share in employment (%)	65.3	37.4	-	-
Agro-food exports (% of total exports)	16.9	7.1	6.2	7.3
Agro-food imports (% of total imports)	6.1	8.4	5.5	6.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	79	71	-	-
Livestock in total agricultural production (%)	21	29	-	-
Share of arable land in AA (%)	71	57	32	34

Notes: *or closest available year.

1. Average of all countries covered in this report. Agro-food trade includes natural rubber.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

Figure 30.5. Viet Nam: Main economic indicators, 2000 to 2020

Sources: OECD statistical databases; World Bank, WDI; ILO estimates and projections; and Economist Intelligence Unit.

Figure 30.6. Viet Nam: Agro-food trade

Note: Numbers may not add up to 100 due to rounding. Agro-food trade includes natural rubber.

Source: UN Comtrade Database.

Agricultural production increased by 2.9% p.a. on average between 2007 and 2016, driven by total factor productivity growth of 1.8% p.a. and greater use of primary factors and intermediate inputs. However, agriculture places significant and growing pressure on natural resources (Figure 30.7). Excessive use of fertilisers, pesticides and other chemicals has contributed to a gradual degradation of water and land quality. Together with climate change, degradation of the natural resource base caused by excessive use of inputs poses a significant risk to agricultural production and the capacity of the sector to maintain current, strong rates of productivity and output growth. The sector accounts for almost a third of Viet Nam’s greenhouse gas emissions.

Figure 30.7. Viet Nam: Composition of agricultural output growth, 2007-16

Note: Primary factors comprise labour, land, livestock and machinery.

Source: USDA Economic Research Service Agricultural Productivity database.

Table 30.4. Viet Nam: Productivity and environmental indicators

	Viet Nam		International comparison
	1991-2000	2007-2016	1991-2000	2007-2016
			World
TFP annual growth rate (%)	2.2%	1.8%	1.6%	1.6%
			OECD average
Environmental indicators	2000*	2019*	2000*	2019*
Nitrogen balance, kg/ha	174.3	154.3	33.2	28.9
Phosphorus balance, kg/ha	29.9	35.7	3.4	2.6
Agriculture share of total energy use (%)	1.7	2.1	1.7	2.0
Agriculture share of GHG emissions (%)	47.9	31.6	8.4	9.5
Share of irrigated land in AA (%)	..	..	-	-
Share of agriculture in water abstractions (%)	94.3	94.8	46.0	43.4
Water stress indicator	..	..	9.3	8.5

Notes: * or closest available year.

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[4] OECD (2020), “Viet Nam”, in Agricultural Policy Monitoring and Evaluation 2020, OECD Publishing, Paris, https://dx.doi.org/10.1787/789c718e-en.

[3] OECD (2019), “Viet Nam”, in Agricultural Policy Monitoring and Evaluation 2019, OECD Publishing, Paris, https://dx.doi.org/10.1787/8ecdbfd5-en.

[1] OECD (2015), Agricultural Policies in Viet Nam 2015, OECD Food and Agricultural Reviews, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264235151-en.

[2] WTO (2021), Tariff Profiles – Viet Nam, https://www.wto.org/english/res_e/statis_e/daily_update_e/tariff_profiles/VN_e.pdf (accessed on 7 February 2021).

Notes

← 1.  Separate target paddy prices (production cost plus 30% profit) are established for each region and for each season based on production survey data (OECD, 2015[1]).

← 2.  A detailed review of Viet Nam’s agricultural policies since Reunification in 1976 can be found in OECD (2015[1]).

← 3.  Private ownership of land is not permitted. Instead, enterprises, households and individuals own land use rights, including the right to rent, buy, sell and bequeath land, and to use land as collateral with financial institutions for mortgages (Land Law of 1993).

← 4.  In 1995 Viet Nam became a member of the Association of Southeast Asian Nations (ASEAN) and its associated ASEAN Free Trade Area (AFTA). Viet Nam was formally admitted as a member of the Asia Pacific Economic Community (APEC) in November 1998. In December 2001, the US-Viet Nam Bilateral Trade Agreement came into effect. In 2007, Viet Nam obtained WTO membership.

← 5.  Decision No. 899/2013/QD-TTg approving the plan of restructuring the agricultural sector, and Decision No. 1819/2017/QD-TTg approving the agricultural restructuring plan 2017-2020.

← 6.  Direct payments to protect and develop land for rice production were increased in 2016 in line with Decree No. 35/2015/ND-CP on the management and use of land for rice cultivation.

← 7.  Wet-paddy farming land is defined as land currently under wet-paddy cultivation or having the conditions for growing two or more wet-paddy crops a year; other paddy farming land is defined as land for growing only one wet-paddy crop a year and land for growing upland rice. Approximately 95% of current paddy land meets the wet-paddy land definition (OECD, 2015[1]).

← 8.  Decree No. 107/2018/ND-CP on rice export business.

← 9.  The same Decree also revised the registration procedure that applies when paddy land is converted from rice to another crop, see OECD (2020[4]).

← 10.  Resolution No. 55/2010/QH12 of the National Assembly on agricultural land use tax exemption and reduction, amended and supplemented by Resolution No. 28/2016/QH14 of the National Assembly.

← 11.  Decision No. 793/QD-TTg dated 27 June 2019 of the Prime Minister on Mechanisms, policies, beneficiaries, level of funding in the prevention and control of African swine fever; Decision No. 2254/2020/QD-TTg dated 30 December of the Prime Minister on Mechanisms, policies, beneficiaries, level of funding in the prevention and control of African swine fever.

← 12.  Decision No. 2053/QD-TTg dated 28 October 2016 of the Prime Minister on promulgating the Plan to implement the Agreement.

← 13.  Decree 41/2020/ND-CP extending tax and land rent payment deadlines.

← 14.  Resolution 42/2020/ND-Ttg dated 9 April 2020 on measures to support people coping with difficulty during the COVID-19 pandemic. Decision No. 15/2020/QD-TTg dated 24 April 2020 on the implementation of policies to support people facing difficulties due to the COVID-19 pandemic. Resolution No. 154/NQ-CP dated 19 October 2020 amending and supplementing Resolution No. 42/NQ-CP dated 9 April 2020 on measures to support people facing difficulties due to the COVID-19 pandemic. Decision No. 32/2020/QD-TTg dated 19 October 2020 amending and supplementing a number of articles of Decision No. 15/2020/QD-TTg dated 24 April 2020 of the Prime Minister on policies to support people have been facing difficulties due to the COVID-19 pandemic.

← 15.  ASEAN comprises Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam.