Communist Review - Vietnam is a country with comparative advantage in agricultural development. Since Doi Moi, the Party and State have issued many appropriate agricultural schemes and policies, creating a driving force for the development of this potential, making an important contribution to the economic development of the country and substantially improving the welfare of rural residents. Amid Vietnam’s increasingly deepening international integration, in the coming period, the country will need to prioritize the study of a number of solutions to promote sustainable agricultural exports.

Key statistics of Vietnam's agricultural exports in the recent past

Vietnam's agricultural growth since the Doi Moi policies has been quite high and stable (an average of about 3.3%/year), not only meeting food consumption demand and supplying raw materials for industrial development and domestic services, but also increasingly participating in the export market. About 50% of agriculture, forestry and fisheries (AFF) output has been used for export in the last 5 years. Agriculture is the only industry with an increasing trade surplus, reaching 10.4 billion USD in 2019. With the plentiful supply, Vietnamese agriculture urgently needs export markets to motivate and lead development in production, thereby improving income for the majority of residents and workers currently living in rural agricultural areas.

Vietnamese agriculture has strongly participated in the process of globalization and integration into world trade via free trade agreements (FTAs), starting with the first generation FTAs focusing on liberalization of trade in goods (tariff reduction, elimination of non-tariff barriers), to second-generation FTAs which broadened the scope of liberalization to certain service sectors (eliminating conditions to market access in certain services), and new generation FTAs which continue to expand the scope of liberalization of services and investment. As of February 2020, Vietnam has joined 12 FTAs, including 1 signed but not yet effective (EVFTA) yet; and 3 FTAs are under negotiation (RCEP, Vietnam - EFTA FTA, Vietnam - Israel FTA). Vietnam has implemented all commitments in the World Trade Organization (WTO). Since 2010, in addition to traditional trade agreements, Vietnam has actively participated in new generation FTAs, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam Free Trade Agreement (EVFTA) with the most extensive and comprehensive level of integration the country has ever implemented. In that global playing field, Vietnam accepts its commitment not to engage in protectionism and comply with most standards of member countries and world markets. The trend of international integration in the coming time requires that Vietnam's agriculture must accept immediate competition, comply with market standards in all three economic, social and environmental aspects.

With good supply capacity, Vietnam has gradually asserted itself in the global AFF market. Vietnam has also had impressive growth in exports over the past few years thanks to opening up international economic integration, and actively participating in bilateral and multilateral FTAs. Specifically: The total value of Vietnam's Agriculture, Forestry and Fishery (AFF) exports in 2019 reached 41.3 billion USD (up nearly 16 times compared to 1995), with an average growth rate of 12.2% per year. Some of Vietnam's AFF products account for a very high proportion, or are high in raking, in terms of global export value, such as pepper, cashew, shrimp, pangasius, coffee, furniture, and rice.

International integration brings about favourable opportunities for export, but also presents many challenges for Vietnam’s agricultural sector in the coming period. Global AFF demand, after a period of strong growth at the beginning of the 21^st century, alongside economic growth and deepening global integration, has shown signs of slowing down (1). Since 2010, strong policies to bolster agriculture by countries around the world and the whirlwind development of the Fourth Industrial Revolution have helped balance global supply and demand of AFF products, and served to inhibit the strong upward trend in AFF prices. According to the most recent forecasts by prestigious international organizations, such as the Food and Agriculture Organization of the United Nations (FAO), Organisation for Economic Co-operation and Development (OECD), the World Bank (WB), and the United States Department of Agriculture (USDA), demand growth for agricultural products has reached a saturation point (equivalent to population growth) and is now slower than global agricultural supply growth, leading to an expected slight downward trend in prices for most agricultural products in the next 10 years. In addition, the price of raw AFF products is increasingly latching on to changes in oil prices and fluctuations in other financial investment channels, with short-term fluctuations in raw AFF prices stronger and more frequent than before. 

The demand structure for AFF products is shifting towards goods with higher nutritional value, processed foods, furniture, organic products, functional foods, chemical cosmetics, and socially responsible, environmental-friendly products. These are commodities with good potential in terms of demand, stability and price growth.

A major challenge for Vietnam's agricultural exports in the future is the resurgence of global trade protectionist trends. Furthermore, political and territorial conflicts in certain regions and between major economies (such as U.S.-China trade tensions); changes in trade policy; countries increasingly raising technical barriers to trade and trade remedies, such as anti-dumping, anti-subsidy, and emergency safeguard measures and among others are always challenges to exports.

In addition, the instability in the policies of importing countries will also have negative impacts on agricultural exports. Over the past years, anti-dumping lawsuits commenced by the U.S. against Vietnamese shrimp and pangasius products; or the European Union’s (EU) application of a “yellow card” on Vietnam’s seafood exports into the EU; The U.S.’s Farm Bill; China’s border trade policy tightening AFF traceability measures, import quotas, import through unofficial channels, and temporary import for re-export; phytosanitary measures for seafood imports into South Korea, the suspension of seafood imports by Saudi Arabia, and some regulations of Brazil or seafood import policies of Russia, … have caused many difficulties for the export of Vietnam’s agricultural products.

To respond to the fundamental changes of the global AFF market, Vietnam’s agricultural sector needs to prepare new competitive advantages when participating in increasingly deep international integration; to restructure exports to meet global market demands: produce of high nutritional value (vegetables, meat, eggs, milk, seafood), processed foods, furniture, organic products, functional products, chemical cosmetics; to develop the AFF processing industry, to build a value chain and put in place appropriate insurance policies to handle risks and increasingly strong market volatility; to ensure compliance with increasingly stringent socio-economic and environmental standards of the global market. 

Given this new situation, Vietnam's export of AFF goods, especially of traditional export products, has recently shown a number of shortcomings. AFF export growth in 2018 was only 7.8% year-on-year, in 2019 was even lower, at 3.2% (much lower than the annual growth rate of about 13% prior to 2018). In 2019, only the export value of forestry products continued to increase sharply, reaching USD11.2 billion, up by 19.2% compared to 2018. However, the export value of other traditional exports fell dramatically. In particular, the total seafood export turnover increased by only 2.7% year-on-year; whereas rice, pepper, cashew and vegetables fell by 9.7%; 5.7%; 2.1% and 7.2% in turn. It is worth mentioning that the 2019 volume of these export items actually rose sharply, at 22.5% (pepper and rice exports surged 23.5% and 3.7% respectively. Coffee, on the other hand, saw decreases in both turnover and volume, down 22.4% and 15.2% respectively.

Exports are also heavily dependent on several markets, especially China and the U.S. In the past 10 years, the two markets, China and the U.S., accounted for over 40 percent of Vietnam’s AFF export turnover. China’s share of Vietnam’s total AFF export turnover rose from 14.6% in 2009 to 25.5% in 2018.

Some of Vietnam's AFF products top global rankings in terms of export volume, such as pepper, cashew, shrimp, pangasius, coffee, wooden furniture, and rice, but are comparatively low in terms of export price. Specifically, Vietnam pepper exports ranked 1st in the world in volume, but 8^th in export price; Similarly, cashew nuts ranked 1st in the world in volume, but 6^th in price, rice and coffee ranked 2nd and 3^rd in volume, but both 10^th in export price. The main reason for this low export value is that raw and unprocessed goods still accounts for a large proportion of exports, at about 60%, while in developed countries this figure is only 2%.

The unstable quality of AFF exports, given that the requirements of importing countries are ever increasing, especially regarding hygiene, food safety and traceability, result in the return of many export orders deemed unsatisfactory during production and processing. The proportion of goods produced in accordance to sustainability standards and international certification is still small, reaching only around 10%. Currently, the production area applying Good Agricultural Practices (GAP) and having been granted GAP certification only accounts for approximately 5%. Product branding is still low (at less than 5 percent of exported products), despite Vietnam having many exports leading produce in world rankings. This is a major limitation, reducing product competitiveness, and inhibiting extensive participation in the retail distribution systems of importing countries.

Logistics costs remain high, accounting for 12% of total production cost in the seafood industry; 23% of furniture production cost; 29% for vegetables and fruit; and 30% for rice. Logistic costs for agricultural development in Vietnam are 6% higher than Thailand, 12% higher than Malaysia, and 300% higher than Singapore. Low-cost logistic services are often linked to poor standards for controlling food hygiene and safety, often resulting in high levels of waste due to spoilage and bacterial contamination. The average wastage in the agricultural sector is currently 25%-30%, in which the seafood sector has a 35% waste rate, and vegetables and fruits could see wastage of up to 45%.

Logistic systems are not yet sufficient for import and export demand. Vietnam's transport infrastructure is outdated, its national gateway port system undefined. Freight transportation depends heavily on road transport services which, on the one hand, puts pressure on the infrastructure system; on the other hand, creates a lot of road costs and increases the cost of freight. Enterprises purchasing, transporting, and processing agricultural products lack adequate equipment and facilities to effectively operate cold supply chains, leading to losses in quantity and quality of agricultural products. Warehousing systems and cold supply chains still retain many limitations, and are not being operated effectively. The logistics infrastructure and services for border trade remain limited; logistic services to support cross-border export and import are still simple, and have not created added value for Vietnamese agricultural products.

Solutions to promote sustainable agricultural exports

Firstly, focusing on developing export markets, considering this as the driving force and signal leading domestic agricultural production. Raising the capacity of information, forecasting, warning, negotiation and dispute settlement systems in the international market. Diversifying export markets, actively exploiting opportunities and advantages from international economic integration to expand export markets. For big and long-term customers, such as China, the U.S., EU, Japan, etc. supporting businesses and localities in the establishment of AFF export associations or joining of importing countries’ AFF associations with the aim of improving the effectiveness of coordination, negotiation, and dispute resolution in order to promote AFF export activity; intensifying negotiations with other countries on the mutual recognition of standards and techniques being applied in Vietnam; quickly dispatching counselors for agriculture, building and opening representative offices of industry and commodity associations; investing in opening bonded warehouses in these key markets. For emerging markets, such as ASEAN, the Eurasian Economic Union, India, the Middle East, Africa and Latin America, carrying out a methodical research on consumer markets and consumer preferences, and from that study suitable crops to meet export demand; negotiating market access; speeding up trade promotion and carrying out activities to support enterprises in attending fairs, exhibitions, market surveys, and finding partners in these markets.

Secondly, based on market signals, re-planning appropriate integrated production and farming areas, organizing coordinated production in accordance to the market’s export demand. Pushing forward the issuance of area codes for growing and farming regions. Gradually digitizing the allocation and management of these area codes.

Thirdly, building key export product pillars in accordance to the value chain, in which the enterprise is the nucleus, linking with economic stakeholders in concentrated production areas with appropriate scale, creating uniform value chains from input to production, processing and consumption, applying high technology, and ensuring competitiveness according to market requirements at all stages. Promoting the building of national brands for key export products (coffee, rice, catfish, shrimp, cashew, pepper, rubber, fruit) and other potential products.

Fourthly, improving the quality of AFF exports, ensuring stable supply and food safety to meet the standards of importing countries, promoting the development of new export products, especially agricultural products involving high technology and deep processing products. Revising and completing a set of technical standards technical standards to harmonize with those of export markets. Establishing and consolidating monitoring systems for the implementation of production standards.

Fifth, prioritizing and supporting the research, application and transfer of agricultural science and technology, focusing on seed stages, production processes, processing, and value chain management. Adopting special preferential policies for the development of high-tech, green, clean and organic agriculture.

Sixth, developing logistics services for export: building a modern system of agricultural product supply centres with different models in terms of scale, function, and meeting international standards. A modern agricultural product supply system should be implemented in accordance with principles of digital supply network, multi-channel market access, with logistics activities for the AFF export value chain based on electronic cross-border trade platforms. Developing disease control and handling services, such as irradiation and heat treatment. Increasing investment in research, building more preferential mechanisms for businesses to invest in post-harvest stages, such as preservation, preliminary processing, packaging, and logistics. Studying the construction of cold storage to preserve fresh products near major export ports, as well as border gates near the border with China.

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(1) There are times when supply growth fails to keep up with demand in the context of climate change that has created concerns about global food and food shortages, altering the relative price trend of agricultural products (which moved upward from the beginning of the twenty-first century) and created a price shocks worldwide at the end of the twentieth century