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FOOD SECURITY IN VIETNAM – CHALLENGES AND POLICY Nguyen Trung Kien Acting Director, Commodity Markets Division Institute of Policy and Strategy for Agriculture.

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Presentation on theme: "FOOD SECURITY IN VIETNAM – CHALLENGES AND POLICY Nguyen Trung Kien Acting Director, Commodity Markets Division Institute of Policy and Strategy for Agriculture."— Presentation transcript:

1 FOOD SECURITY IN VIETNAM – CHALLENGES AND POLICY Nguyen Trung Kien Acting Director, Commodity Markets Division Institute of Policy and Strategy for Agriculture and Rural Development - IPSARD

2 Contents 1.Food security situation in Vietnam 2.Possible risk scenarios of food security in Vietnam 3.Policy for managing food security risks

3 Food Security Situation 3

4 Food Availability by Commune Northern provinces achieved food sufficiency Southern provinces produced surplus food (rice) for export

5 Surplus supply now concentrated on: “Core Rice Belt’ in six provinces

6 Vietnam per capita rice consumption has begun to decline, this will likely to accelerate P.C. Rice Consumption in Asia (Kg/Yr) Myanmar160 Vietnam135 Philippines128 Indonesia104 China95 South Korea88 Malaysia80 India77 Japan45

7 Domestic Market Growth: Changing size/composition of food expenditure 2010: $30 billion 2020: $65 -70 billion? Source: WB

8 Changing economic role of rice Source: Steve Jaffee, WB, 2011

9 Food Affordability Poverty Rate (%) Domestic Food Price (VND/kg) 20062010 Vietnam15.510.7 Urban7.75.1 Rural1813.2 By region Red River Delta10.16.5 North East22.217.7 North West39.432.7 North Central Coast26.619.3 South Central Coast17.214.7 Central Highlands2421 South East4.63.7 Mekong Delta13.311.4 Source: VHLSS 2002 – 2012

10 Food Affordability High margin attained but income from rice production is still below $1 Per Capita/day An Giang 2009/10 (MDI Survey Results) Total Cost/KG (vnd 000) Profit/KG (vnd 000) Profit/CostProfit Per HH (VND Million) Profit Per HH ($) Winter – Spring 2.871.5353%8.7527 Summer Autumn 3.96(0.03)-1%(0.1) Autumn Winter 3.301.9061%8.0485 Average3.331.0933%1012 Average household size is 4.4 members Average profit per capita $230/year = VND 3.8 million or 316,250/month. Current poverty line is VND 400,000/person/month

11 Food Utilization Threat of Undernourished Children Percentage of Under-5 Children Undernourished (weight for age) Group/RegionPercentage Vietnam20.2 VietNam - Kinh/Chinese18 VietNam - Other Minorities29.7 Red River Delta18.5 North East22.3 North West28.8 North Central Coast21 South Central Coast23.7 Central Highlands23.2 South East10.8 Mekong River Delta20.4

12 …. More rice cannot solve all problems of food insecurity… Indicators90-9295-9700-0205-07 Malnutrition rate (%)31221711 Number of malnourished people (million) 21.016.713.39.6 Minimum calorie request (Kcal/person/day) 1710174017801810 Calorie consumption (Kcal/person/day) 2090231025202770 Source: FAO, / / Mekong Delta: malnutrition with food surplus Malnutrition rate is higher in the specialized area of rice production in comparison with areas with agricultural diversification There are correlations between poverty and malnutrition rate (1999- 2009) Source: CASRAD, 2011

13 Food Security Risk 13

14 Chỉ số giá LT thế giới (2002-04 = 100) World food market has witnessed 3 times of price shock since 2007, with amplitude 50% higher than the last 2 decades, and strong correlates with energy prices Source: FAO World Food Price Index

15 The rate of fertilizer price increase is higher than the rate of production growth and rice price increase Source: Agroinfo Price of rice Price of NPK fertilizer

16 Source: GSO, Vietnam Animal Feed Association Import and price of material for animal feed is increasing Rice export value Animal feed and inputs import value (000 USD) Soybean import price

17 Land use changes by land class and scenario, 2007 -2030 Source: Van Dijk et al., 2013

18 Climate change and impact on crop yield Source: Van Dijk et al., 2013 Source: MONRE, 2009 Impact of climate change in Vietnam, 2020 - 2010

19 Flood Risk Area with high flood risk in high climate change impact scenario Source: Van Dijk et al., 2013

20 National Centre for Hydrometeorological Forecasting, MONRE 2010 Central Committee for Flood and Storm Control, 2010 Impacts of natural disasters on agriculture Paddy & cultivation area loss due to natural calamity (000 ha) Number of flash flood over years

21 Food Security Policy 21

22 Policy Objectives  Focus on rice self-sufficiency  Policy objectives: To ensure national food security To ensure food supply sources To meet nutrition needs To ensure benefit of rice farmers To ensure people’s accessibility to food To increase efficiency of paddy land To improve international position of Vietnam

23 Food Security Policies Supply intervention: 1.Policy to ensure supply sources 2.Policy to fix floor price for rice procurement 3.Procurement policy for temporary storage 4.Policy to fix conditions for the rice export enterprises 5.Direct support policy for paddy farmers Demand intervention: 1.Policy to restrict export in emergency case 2.Policy to stabilize price by fixing the retail price 3.Rice provision for poor households

24 To ensure supply sources Objective: To ensure national food security Content: Planning and keeping 3.8 million ha of paddy land by 2020, of which 3.2 million ha is irrigated for >2 crops/year Effectiveness:  It is an important policy to ensure food security  Vietnam remain to have enough domestic supply with only 3 million ha of paddy land  To improve income, farmers still convert the planned paddy land to other annual crops  Need to consider rice export strategy to grasp the multi-dimensional benefits of rice production. 24 Supply Interventions (1)

25 Vietnam’s Rice Balance in 2030 in the Worst Scenario Yield: 5.8 tons/ha. Post-harvest losses: 10% 25 Scenarios Projection in 2030 Paddy quantity Rice consumption Rice export 3.8 mil ha40.312.75.2 3.6 mil ha38.212.74.1 3.3 mil ha35.012.72.4 3.0 mil ha31.812.70.8 Source: WB, 2011 2030: Population: 110, 4 million Consumption: 120 kg per head Urbanization rate: 41,8%

26 Efficiency Question 26 PaddyCoffee Export value (billion USD) 3.72.7 Area (million ha) 4.10.5 Water use (billion m3) 101.49.1 Household number (million households) 9.30.5 Source: AgroCensus

27 Policy to fix floor price to ensure a minimum profit of 30% production costs for farmers Objective: Ensure income of paddy farmers Content: Food enterprises purchase paddy at floor price. MOF, MARD set up method; provincial authorities estimate and declare floor price Provincial authorities monitor and manage the process of procurement. Effectiveness: It is difficult to calculate production costs Mainly apply in MRD, not for other regions 27 Supply Interventions (2)

28 Households by Farm size (%) Source: agrocensus 2011

29 Income Source of Paddy Farmers in MRD, 2010 29 Farm size The average income per capita of a rural household (VND/month) Total average income per capital (000 VND) Contribution by paddy production (%) 1 ha 1.070.500 85919% 1 – 2 ha118326% 3 ha193036% 4 ha197268%

30 Procurement policy for temporary storage Objective : increase demand to push procurement price Content:  Support 100% interest rate for enterprises procuring for temporary storage within 3 months  The amount of procurement is proposed by VFA at market price to stabilize national reservation, consumption and export. 30 Supply Interventions (3)

31 Source: Agroinfo data Unclear impact of the storage procurement policy 20/9 buy 0.5 mil tons Thailand 5% broken rice price (USD/ton) Vietnam whole sale rice price (USD/ton)

32 Conditionalities on rice export enterprises 32 Objectives:  Develop long-term relationship between enterprises and paddy farmers to stabilize market outlets and income for farmers  Ensure the balance between export and domestic consumption  Stabilize rice market, enhance efficiency of export Content: Setting conditions for enterprises to participate in rice export:  > 5000-ton specialized storage  >1 milling factory with capacity of >10 tons/h  Located in province/cities with rice surplus for export and international seaport. => Maintain the minimum storage, equivalent to 10% of export volume of rice in 6 months ago=> if the domestic price of rice increase suddenly, the storage will provide rice to meet demand Source: Decree No. 109/NĐ-CP/2010 Supply Interventions (4)

33 Direct support to paddy farmers 33 Objectives: Support to protect and develop paddy land Content:  Supporting 500.000 VND/ha/year for organizations, households, privates producing on specialized land of wet rice;  Supporting100.000 VND/ha/year for organizations, households, privates producing on the other paddy land except the area of upland rice can expand themselves without following any regulations and plans of paddy land use. Effectiveness:  Support famers directly  Difficult to implement and monitor  Difficult to identify upland rice area in land use planning  Low effectiveness: Income of paddy farmers do not improve significantly => Move to other crops or to non-farm activities Source: Decree No. 42/2012/NĐ-CP issued 11/05/2012 Supply Interventions (5)

34 General Support 34 Objective: to increase income of farmers from agricultural production Content:  Exempting agricultural land use tax to the poor households, agriculture households in the disadvantaged areas, reduce 50% of agriculture land use tax for the others.  Support in borrowing loans to buy facility, materials with priority interest rate.  Exempting irrigation fee  R&D  Seed subsidy  Rural infrustructure  New rural village program ..... Supply Interventions (6)

35 Policy to restrain export in emergency case 35 Objectives: Reduce inflation, stabilize domestic consumption price and ensure food security Content:  In 2008, crisis of global food price => The guidance of Prime Minister to stop signing any new contracts of rice export  The Government imposes tax on rice export (period of validity: from 21/7-19/12/2010) Source: Decision No.104/2008/QĐ-TTg issued 21 /7 /2008, Demand Intervention (1)

36 36 Export restriction time (25/3/2008) US Okays Japan export stock (5/2008) Policy to restrain export in emergency case Profit analysis of stakeholders in the period of price fluctuation in 2008 (USD/ton)

37 Retail price stabilization 37 Objectives: Support the low income group in case of high inflation Content: Subsidize the sale of basic foods: tax concession and interest rate subsidies for retailers (focus on supermarket system) CT: 03/2008/CT- BTC (01/12/2008 ) CT: 03/CT- BTC (31/12/2009) CT: 05/CT- BTC (22/12/2010 ) CT: 03/CT- BTC (12/12/2011) Movement of retail price of rice (VND/kg) Demand Interventions (2)

38 Direct food support 38 Objective: Direct food support Content:  Poor households involved in forestation and forest protection will receive 15 kg rice per capita per month during the period when they are not able to provide themselves with staple food (not over 7 years).  Poor household in the border areas will be granted 15 kg rice/person/month until they can self- sufficient in food.  Support for food-deficit provinces before the harvest  Direct food support for provinces suffered from natural disasters Demand Interventions (3)

39 Changing Approach 39 Current ApproachNew Approach Protect paddy landProtect agricultural land Rice self-sufficiency Increase farmer income and improved nutrition Resource intensive Technology intensive and environmental friendly practices Production focusPost-harvest and trade focus Small farm and middleman dominationLarge scale and value chain linkage Administrative controlMarket-based intervention Food exportUtilize the benefit of international integration Inflation control Target to poor and vulnerable groups of consumers

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