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The
role of agriculture in economic development is important for Vietnam as its
agricultural sector includes 80 percent of the population, 73 percent of the
workforce, and 28 percent of GDP (MARD 1997). Sustainable agricultural
development requires strategies for rational use of resources, especially land,
the basic and non-expanded resource. The
Central Highlands is one of seven agricultural regions in Vietnam, has fairly
fertile soil (basalt) and a low population density. It has a large potential
for increasing agricultural production, especially for industrial crops such as
coffee and rubber. However, as the region is the watershed of several rivers in
lower regions, it is also vital to preserve the forest resource. Resources
in the region, however have been over-exploited. A vast area of forest has been
cleared for growing coffee. Shifting cultivation is still practised by ethnic
minority groups and immigrants from other provinces. The result is faster
burning of forest for land, and thus faster erosion of soil. Forest degradation
is destroying bio-diversity, causing desertisation of land, and other
environmental problems. The
critical issue to explain these consequences concerns the externalities of
production. Negative externalities greatly exceed the positive ones, and the
balance of those still result in non-sustainable land-use practices.
Institutional weaknesses, such as weak property rights that cannot provide
enough incentives for the preservation of resources are part of the
explanation. Implementation of property rights have failed to help peasants to
use resources more sustainably and efficiently. The
solutions, in theory, is to limit negative effects by bringing the private and
social costs of production closer. Strengthening markets can help in achieving
this. If markets fail to settle the problem, the intervention of the government
may be required. Other than direct
government control of to production processes, letting markets to play
its role of directing the best land use, together with the zoning of selected
forest areas can be recommended. Policies to improve institutional weaknesses
relating to property rights are also needed. This
study focuses on investigating peasant behaviour in the process of development,
and the role of markets in directing peasant behaviour. Institutional issues
are discussed through reviewing the policy reforms and actual implementation so
far.
There
have been several studies on the same issue, involving both economic and
technical aspects of land use. Those researches comprise discoveries on
different local regions and in the whole country. There
are two nation-level vital programmes. Those are Integrated Investigation
Programme (1976-1980 period) and the Central Highlands Programme II (1984-88
period). The next independent nation-level study No. KX-DL 95.08. Some
studies on land use focused on different aspects in different regions and
districts such as ‘To accomplish agricultural production structure in the
Central Highlands period 1991 - 2000’ (by Luu Duc Hong, the National Economics
University (NEU), 1992). ‘Perfecting the methods for building agro-forestry
projects on barren land in the middle and the North of Vietnam’ (Cao Vinh Hai,
NEU, 1995). ‘Land use in market economy in Thanh Tri district’ (by Le Van Hoat,
NEU, 1995) focuses on land use with different crop systems.
This
study focuses on analysing the situation of land use in Central Highlands in
the period 1988 - 1996. This period is chosen because in 1988, it is the first
time Land Law was effected. The
use of land is examined mainly in economic aspect concerning agricultural
production. Issues of ownership, property rights are discussed. Effects of
property right patterns and prices of cash crop produce (coffee) to the
expansion of coffee area and the boom of population are discussed to find out
the relative importance of changes to these factors. Some
environment issues are put forward, through which primary evaluation of
environmental degradation is defined and would be suggested for further
research on this hot issue. In
general, this study focuses on policy aspect and the role of markets in solving
the problem of socially-wasteful use of resources.
The
study tries to answer the following questions: 1. Can
markets solve the sustainability problems of land use in Central Highlands? 2. What
are the effects of property right patterns to agricultural development in the Central Highland? 3. What
is the role of government in strengthening markets and in directing sustainable
land use?
The
thesis inherits data and information from different sources such as Department for Land Management (GDLM),
General Statistics Office (GSO), and considerably from the National Institute
for Agriculture Planning and Projection (NIAPP). Information is also collected
from other resources such as reports, newspapers, and surveys carried out by the
Ministry of Agriculture and Rural Development (MARD) and NIAPP. The
study relies on descriptive and comparative analysis with evaluated judgement
based on the collected data.
Excluding
11 Tables and 28 Appendices, the Thesis includes mainly four chapters which are
arranged as follow: Introduction Chapter 1:
Conceptual and Methodological Framework: This chapter covers issues of
agricultural development and policy implications. Chapter 2:
Land Policies in Vietnam: The chapter reviews the trend of land use, legal
story with the factual situation, reality, implementation of policies so far
with anecdotal evidence. Chapter 3:
Profile of Land Use in the Central Highlands: In this part problems on land use
in the Central Highlands are described and analysed. Chapter 4:
The Policy Agenda for Sustainable Development in the Central Highlands: This
chapter aims at answering the question What
needs to be done to promote agriculture growth with the preservation of
resources. Conclusion
summarises main problems and the answer to achieve better land use.
Agricultural
development has long been discussed in economic development terms. Todaro (1993)
divides the world agriculture into two distinct types: (1) the highly efficient
agriculture of the developed countries; and (2) the inefficient and low
productivity agriculture of the developing countries. The increase of
agricultural production in developing countries helps in raising levels of
living for the average rural population. This increase also helps to promote
the contribution of agricultural sector to economic growth. Agricultural development is defined as the
process of transition from subsistence to commercial agriculture. Todaro (ibid.) identifies this process of
agricultural production into three broad stages: a) the pure, low productivity
of most subsistence peasant farms; b) the ‘diversified’ or ‘mixed’ family
agriculture, where part of the produce is grown for self-consumption and for
selling to the commercial sector; and c) the ‘modern’ farm, exclusively engaged
in high productivity, ‘specialised’ agriculture geared to the commercial
market. A
numerous definitions have been remarked by different authors and organisations
such as Ingham (1993), FAO (1989), Douglas (1985, cited in McC Netting, 1993).
Those denotations remark the management of resources for agricultural
development to ensure anti-collapse ability and protection of environment. The
concept of sustainability is thus controversial and often not well defined,
however it recognises that agriculture is affected by the evolution of both
socio-economic and natural systems,
and thus agricultural production is no longer purely a technical question, but
one conditioned by social, cultural, political and economic dimensions (Conway
and Barbier 1990, cited in UNDP 1995). Sustainable development should be the
balance of economic goal, social goal, and environmental goal.
Social
costs is the cost arising form the production activities of firms or
individuals to be borne by all individuals in the society. Social cost is
defined as the sum of social cost borne by firm or individual and external cost
not borne by those agents (Graaff 1987). One of the reasons why social costs
differ from observed social cost is the existence of externalities or external
cost. Externalities
which are referred to by different definition, imply that market prices in a
competitive market economy will not reflect marginal social costs of production
(Bohm 1991). Markets fail in allocating resources efficiently. Externalities
can be positive or negative and thus affect other agents in two opposite ways.
Public
good is a commodity or service that if supplied to one person can be made
available to other at no extra cost. It is more common that a good is said to
be a mixed good or impure public good other than the extreme case or the case
of a ‘pure’ public good. The provision of a public good (when possible) through
a private market will not enable the ‘optimal’ level of output to be produced. Example
of public good include national defence, street lightning and environmental
protection. It is generally expected public good to be provided by the
governments and paid for through compulsory taxation.
Ownership
is the right of an agent (individual or legal agent) to posses a property
himself and thus he has completely right to dispose of his property. The form
of ownership of production resources determines the access of individuals to
the production process and thus determines their access to output. Efficiency
of production depends on the formulation of production which resulted from the
incentive to the productive agent’s benefit. In agriculture production, the
from of ownership of resources, particularly of the crucial factor - land,
notably affects the efficiency of farm cultivated by peasants who have certain
status of ownership of land (Ryan, 1991).
Peasant
is defined as the one who lives in the country, works on the land and has a
certain access to the soil, whether or not he has absolute ownership of his
plot. One of the main sources of differences in the views of peasant economics
concerns the ‘rationality’ of economic behaviour by peasants. The issue has
been widely discussed. In
the early stage of agriculture development, peasant is resistant to changes. It
seems to be that peasant is acting ‘irrationally’ and this is common throughout
much of the Third World nations. Risk and uncertainty play a major role in the
economics of subsistence agriculture and thus affect peasant’s behaviour. The
promoting force in peasant’s life may be the maximisation of his family’s
survival, not the maximisation of income and thus motivations for peasant to
changes are restricted. Explaining
for irrational manner of peasant in developing countries - that is wasteful use
of resource, environmental degradation - distorted incentive of farm-gate price
of some cash crops and weak institutional structure are involved. Imperfect
information - that results from the weakness of infrastructure and even of
institution structure - is one of the reasons for that market cannot completely
play its role in allocating resources. The
conclusion is that the peasant farmers in fact act rationally and are
responsive to economic incentives and opportunities. The efforts to minimise
risks and remove commercial or institutional obstacles to small farmer
innovation are, therefore, essential requirements of agricultural development.
There
have been different theories concern the role of government in economic
development in general and in agricultural development in particular, involving
correcting distortions and generating distortions. The role of the the government
is important in correcting market failures. The
role of government is critical in providing support to agriculture sector in
the form of building infrastructure, research, education and input supplying
systems. This involves the market failure arguments in which increasing
returns, public goods, and externalities are most of consideration. Timmer
(1991) also concludes that support and organisation for research, extension,
irrigation and rural marketing infrastructure are attributed to the role of the
government.
Land Reform Policy ‘covers a wide range of social changes
involving the access of people to
land, the ownership structure of land, the size structure of land holdings, and
legal or contractual forms of land tenure’ (Ellis 1992:194). Due to its nature,
at the present time, land reforms should be regarded as land policies, which
are the 'rules or guidelines that express the limits within which action should
occur'. Land policies are concerned with the actual implementation of land
reforms in development strategy. It
is conceivable that land reform can increase the size of mini and micro-fundia,
or organise production in collectives and state farms, might succeed in
reducing risk and could thereby eliminate obstacle to rapid technological
change. The
key issue in land policies implication is the assignment of land property
rights. The essential role of land property rights, as marked by Hayami (1993)
is to internalise the gains from land resource conservation and improvement.
Private property rights on land appear to be the efficient assignment for
agricultural development (Hayami, 1990).
Over
the 1985 - 97 period, the area of agricultural land increased. This was mainly
due to the expansion of perennial crops land. An overall diversification in
land use, which results in the diversification of products is confirmed. Beside
the reclamation of new arable land, agricultural land is extracted for other
purposes. The lost land for purposes other than agriculture is usually fertile
land. Forestry land decreased over the years until 1990 and then increased a
bit. Beside afforestation programmes in the middle land of northern region, in
mountainous regions, forest is still being cleared. In Vietnam, the role of
forest is emphasised due to the characteristics of a tropical climate, with
high humidity and rain; and mountainous topography with high slopes.
Since
1945 Revolution, various policies on land have been framed. Those include land rent
reduction, confiscation of lands of the absentee landlords and colonists,
landlords and requisition by purchasing from motivated landlords. The
confiscated and requisitioned lands then reallocated among peasants aiming at
objective ‘land for tiller’. During the sub period 1954 - 57, agricultural land
resource was entirely distributed to the farmers for which certificates of
ownership were given. The establishment of private ownership of land for the
peasant in this period had provided appropriate incentives for the farmers to
cultivate on their land. Significant growth of agriculture output was observed
in the increase of food output by 52% compared to that of 1939 - the year the
highest agriculture production was ever attained during the domination of French
(Pham Nhu Cuong et al. 1991, Phan Van
Tiem, 1992). New policy on land was applied in the
1958 - 60 period with the collectivisation of agricultural production, aiming at overcoming limitation of
land per capita, deficient technology, and investment. The formation of
co-operatives and production collectives initially caused higher agriculture
output. Production collectives also received considerable investment from the
government. The establishment of state plantations reclaimed new arable land for
perennial crops. However, the transformation from low-level co-operatives to
high-level ones, led to structural problems. Collectivisation undermined the
incentives of peasants to invest time and capital for production. This model of
production made agriculture production stagnate until 1980. Since
1981 a household-managed land system was established with the introduction of
production contract. Farm lands under management of co-operatives were then
allocated to individual households. Till
the 1988 reform, each farm household was given a long-term tenure for private
management with the sole obligation of paying land tax. However the prohibition
of private land transfers together with the limitation of tenure periods has
hampered efforts to concentrate lands in the hands of efficient users through
market transactions and reduced incentives for private investment for land
conservation and improvement. The
new Land Law allows the transfers of land use rights. The transfers of land use
rights, however need approval by the local government agency. Private
households’ land use rights are established and protected by the issuing of
Land Use Right Certificate (LURC). The protection of land use rights creates
security for land users and thus provides incentives for the investment on
land. Together with land use rights, land users have some obligations. The
strengthening of households’ land use rights is however, not inconsistent with
the principle of state ownership of land and the government’s responsibility to
manage land to maximise the welfare of all people as stated in the 1992
Constitution. It should be added that even in free market economies, property
rights are assigned by the government to individuals according to laws. With
the given five land use rights, incentives are obviously provided for the land
users to use their land more efficiently. Investment on land by peasants for
increasing land productivity and conservation of land is encouraged.
There exist some issues
regarding the implementation of land law so far (UNDP 1996). Those relate to
the grassroots implementation problems encountered by rural households; and the
consequence of actual and potential landless. After
implementation of Decree No. 64-CP, some achievements have been reached. Over
the country, agricultural lands have been allocated to million of farming
households for their own cultivation. Food production output increased 0.5
million tons in 1994. The
implementation of the five rights of land use for households bring various
trends to agriculture production. One of the trends is the decrease in the
fragmentation of lands. Land use right certificates (LURCs) were applied for
mortgaging to get loans from bank for investment on farms. Existing Problems The
treatment on LURCs as a commodity may have its negative effects since the gaps
between the rich and the poor is widened through the accumulation of land in
the hand of a minority number of households and the rest landless peasants
become rent-tenants. Directive
247-CT (dated 28.4.1995) aims at preventing the transfer of agriculture land to
other purposes. Actually, Directive 247-CT did not work well. Those changes,
with the argument of the use of agriculture land in the form of crops structure
changes and husbandry, not the transfers of agricultural land to other
purposes, were approved by the local authorities.
The
Central Highlands is located in Southern West of Vietnam. The region is known
to have an important position in respects of economics, politics, defence in
the country and over the Indochina Peninsular region. Natural
conditions (soil, water resource, climate) are suitable for agriculture
development, especially perennial cash crops such as coffee and rubber. The
region is the watershed of many rivers in the plain areas. Rivers and streams
is a potential water resource but is found seriously unbalance in dry season.
The soil is The
population in the Central Highlands in 1995 was 3.1 million, accounting for 4.2
percents of the population in the whole country. The population in the Central
Highlands increased rapidly. There are about 37 ethnic minorities in the
Central Highlands, of which the Kinh occupies 60.1 percent of the total
population, the rests are ethnic minority groups. Those
ethnic minority groups have different characteristics concerning culture,
languages, customs, religion, and types of cultivation in agriculture and
utilisation of natural resources.
The
Central Highlands is evaluated to be a potential region for agricultural
development. It is however facing some problems concerning the use of land. The
decrease of forestry area and the increase of barren land have put forward the
question of establishing a strategy for development pertaining to
socio-economic as well as environmental aspects.
In
the 1985 - 97 period, the area of agricultural land increased sharply with the
average of 17 thousand hectares annually. A
great number of immigrants who have settled down in the region requires the
expansion of land for special use and new economic zone. This trend of illegal
immigration is still continuing. The reclamation of new land for agriculture,
especially for perennial crops is traded-off by clearing forest. Afforestation
plans which recovered 156 thousand hectares of forestry has raised up the area
of forestry land to 3.2 million hectares in 1997. As the land resource is fixed, the expansion of new arable
land, land for special use and homestead could only be extracted from unused
and forestry land. It is worried that land resource is being degraded. The
development of perennial crops, whose products are for market exchange,
especially coffee and rubber, has contributed to the development of agriculture.
Coffee production in the Central Highlands, contributes the largest proportion
to the export of coffee in the country. The
area of forestry land decreased rapidly. In ten years from 1985 to 1995, the
average area of forestry land decreased by 10 thousand hectares annually.
Changes of Agriculture
Land Agricultural
land increased sharply in 1985 - 1996 period with the increase of both the area
of land for annual and perennial crops. The
increase of annual crops land is mainly due to the expansion of land for dried
food crops and industrial crops. There was large fluctuation in the area of
land for irrigated paddy because the
irrigation system has not been improved. Rainfed
rice cultivation, due to its low input cost, is favourable by ethnic minority
groups and in the early stage when the new immigrants settled down. The
conventional agricultural production based on shifting cultivation has resulted
in the clearing a vast area of forest. Cultivation
of other dried food crops and industrial crops is extensive. It is noted that
the increase of dried and industrial crops land is accompanying with the use of
hybrid dried crops seed such as corn and cassava with higher productivity and
are suitable to the climate. The
area of perennial crops increased nearly 8.8 times in the period. This is
mainly due to the increase of land for coffee and rubber. Coffee cultivation as
the main crop in the region, has brought a large amount of foreign exchange earning.
Attracted by high price incentive, peasant rushed to grow this tree. Rubber
is the second main perennial crop in the region. Promotion for rubber
cultivation can be remarked in the year 1989-90 with the appearance of the
first private plantations. The support for rubber cultivation was also from the
private financing and by credit from banks or rubber companies. The
area of land for mulberry, although occupies a small proportion in agriculture
land, increased rapidly. This increase has helped in creating the largest
concentrated zone for mulberry which accounts for 90 percent of the total
mulberry output in the country. However, the changes of factor market decrease
land for mulberry. The same trend happened to the area of land for tea. The
cultivation of fruit can be described as testing-by-doing process. It is noted
that the area for cashew occupies a large proportion. This tree can grow well
in drought land and it requires low investment. The introduction of this crop
to the peasant, especially for the poor is significant in generating marketable
surplus. Changes
of Forestry Land In
the Central Highlands, forestry land occupies the largest proportion. Over the
period 1985 - 1996, forestry land area decreased 100.3 thousand hectares. The lost
of natural forest land is due to different reasons. Those are the
over-exploitation of wood (legally and illegally) and especially the
reclamation of new land for agriculture, mainly for perennial crops. Shifting
cultivation by ethnic minority groups in the region contributes to forest
clearing. The decrease of forestry land, especially in the watershed, leads to
serious environmental consequences. Those negative externalities have not been
solved for that social costs are not paid by the externalities-generated agents
(peasants) and thus socially wasteful use of land still prevail.
The
Central Highlands has a great potential land resource. Over the years, the
socially wasteful use of land leads to heavy erosion and degradation of soil. Forestry-exploitation
activities in the Central Highlands over the years have resulted in the
clearing a vast area of forest. The consequences of this are soil erosion,
exhaust of forestry and land resources, pollution, and decrease of bio-diversification. For
a preliminary evaluation of environment effects, two criteria are considered.
Those are: - Covering ratio of
vegetation and anti-erosion ability of the land; and - The ability to
maintain and enrich soil fertility. According
to studies of NIAPP on the concerned issue in the Central Highlands, it is
concluded that land use for coffee, rubber, grazing, and inter-cultivated dried
crops has the highest covering ratio which range from 50 to 97 percent. Dried
paddy, pure-cultivated dried crops has low covering ratio, just ranging from 10
to 30 percent. Perennial
crops thus can be recommended for environment protection. The role of forest in
protecting soil is confirmed. The huge negative externalities of dried annual
crops cultivation in terms of less environmentally sustainable is proved. There is
contradiction between goals. Protection of the environment requires the
reservation of forest. Agriculture development demands new arable land. Aiming
at both economic and environment goals, cultivation of perennial crops is of
recommendation. The fact, however is hard that peasant could only gradually
shift to perennial crops cultivation.
Strategy
for sustainable agricultural development should be based on the point of view
that land resource is economically and efficiently used in the process of
developing a diversified agriculture with cash-crop production and
environmental protection. A problem would arise that for the distorted
incentive from the cash crops (coffee and rubber), peasants are motivated to
clear forest, especially the preservative forest. Government’s master plan of
forest covering would be helpful provided that this resource of capital is
properly allocated. To
prevent the decrease of forest, land ownership must be well defined not only
for agriculture land but also for forestry land. Historically, land had
initially been allocated mainly for use in state plantations. Cultivation right
on land gradually shifted to the households for their own management. Land Law
1988 and the revised 1993 define some rights of the land user. In some extent,
property rights on land are defined. The issuance of Land Use Right Certificate
(LURCs) however, has not been really accomplished. Non-holding of LURCs by the
peasants as a mean of mortgage causes them difficulties in accessing credit for
agriculture production. Plantations
for perennial crops in the Central Highlands have been historically established
in previous decades. Before 1980s, almost plantations for coffee and rubber had
been owned and managed by the state. Since then and until recently, operations
of state plantations stagnated, and private plantations developed. Plantations
for Coffee In
the process of transforming to new economic mechanism, the organisation of
coffee cultivation by the state sector becomes less important. Almost
plantations of coffee are pertained to private ownership at present. Over the
years, the role of state plantations gradually shifts to the private ones. The
proportion of coffee land of the state sector decreased sharply while the
proportion of coffee land cultivated by private sector increased over time,
especially from 1987. The generation of large-scale private plantations is
restrained because of the land-ceiling regulation. Small scale of farm, however
has its own advantages which is confirmed in the higher efficiency in
comparison to the bigger ones. Plantation
for Rubber Rubber
plantations has long been established in previous years. In the transition process, in almost state
plantations, plots of land are allocated to the workers under contract system.
Recently, the development of rubber cultivation has been promoted by the
establishment of project for small holder rubber cultivation in the region with
the area of farm ranging from 1 to 5 hectares. Comparing the
efficiencies of different scale of rubber plantations, it is concluded that the
small-sized farm is more efficient. There is sharp differentiation between the
profits earned from different-sized farms which decrease sharply as farm size
increase. Implying
small farms are private ownership, it confirms that private ownership farms are
much more efficient than the common-property ones.
The solution
for unsustainable land use in the Central Highlands should focus on whether the
market can solve the problems or let it be the task of the government. What
scope would be necessary in the government intervention to correct market
failure is a question. This solution aims at ‘internalising’ externalities of
agricultural production.
If
market can practise its role in affecting peasants’ behaviour for an
equilibrium allocation of resources, external diseconomies would be reduced.
Factually, market forces are not completely activated, private and social costs
of production are largely different. The role of the government is of emphasis
in promoting the manipulation of markets. The
control of the government should be indirect and in combination with perfect
markets. The zoning of selected forest areas for conservation purpose by local
authorities can be suggested to limit the negative externalities of production.
Zoning of forest would also be a source of growth and sustainability. Strict
measures should be applied with the combination of legislation and economic
incentives. Implementation of laws would be successful provided that benefits
are accrued to peasants in relation to their forestry protection activities. In
the Central Highlands, the zoning and protection of some selected forest areas
in the watershed requires a huge cost. Incentives for forest-protecting cadres
and ethnic minority groups need to be provided. The role of the government is
to provide necessary conditions for their socio-economic life. This concerns
with the provision of infrastructure improvement, extension service to improve
their agriculture production and enhance peasants’ market access. From
a macro level point of view, land use planning (zoning) for residential,
agricultural, and industrial purposes enables the efficient infrastructure
investment. The problem is that zoning, on the one hand may satisfy objectives
of macro-management regarding infrastructure investment, on the other hand,
from a micro point of view, may restrain farmers’ choices in their land. This
is because of the differentiation in soil type as well as natural conditions of
different parcels of land. Investment
by the government in infrastructure in some extent, may have negative effects.
The case of forgoing a much higher profit from shrimp-raising in expense for a
new crop of rice in Mekong River Delta when the new irrigation system is
established (Vo Tong Xuan, 1998) is an example. The
approval of what types of agriculture in a zoned area is facing difficulties.
This requires the flexiblityof restriction on specifying purpose of land use in
the process of zoning. Particularly, advisory land use should be recommended
rather than prescriptive specification. In
agriculture marketing, if market competition is hard to be attained, the role
of public enterprises is important. Those enterprises, if necessary, should be
subsidised in their operations since their transaction cost may not be
compensated from the poor conditions of market and infrastructure. Their role
in correcting market failures is essential as private traders who possess
monopsony power in purchasing market, in maximising their profits will impose
unfavourable conditions for the peasants. In
a specialised cash crops agriculture, issue of food security is not an anxious
matter provided the development of other socio-economic conditions. The worthy-considered point is that in
remote area where agricultural production is still at subsistence level, main
income of peasants are for food and mainly food crops are cultivated. The low
income from their farm as well as the instability of their food production may
put the peasants into the danger of starvation in a bad year. In this case,
government’s subsidy in the form of food aid, credit for production, the
diffusion and instructions for extension service, is of importance.
Markets
can operate most effectively if there are many participants and the operations
of market may be enhanced through improved information to all participants.
Interference with the market causes distortions of production and demand, which
by themselves bring social and environmental costs (Dent, 1997). Other
than direct intervention, especially to price, government control should help
in directing market development such as to provide necessary conditions for
market competition, or to give priority to the domination of state-owned or
private firms. Aiming at a competitive market, conditions and the promotion for
the competition in trade and processing agriculture products are important. In
the Central Highlands, the improvement of infrastructure would reduce the
transaction cost of agriculture products. A competitive environment can provide
more market access to the peasant. One of the major
problems concern with the less market accessibility by the peasant. Low price
of agriculture products resulted from the poor processing facilities and less
competition bring low profit to the farmers. The issue is obviously perceived
in case of coffee. Good domestic wholesale price of coffee and correspondingly
good farm-gate price can be explained as one of the reasons for the boom of
coffee cultivation in the Central Highlands. For
sustainable use of land, that is to cultivate intensively and protect the land without trading-off by forestry land, peasant’s income
must be adequately compensated by a majority proportion of their produce and
thus enabling them to satisfy their needs and invest in production. Poor
quality of product resulting from the insufficient processing facilities and
less competition in purchasing network reduce peasant’s income as their price
is relatively low in comparison with export price. The solution for this
situation would be to increase competition in processing and wholesale trade.
The role of the government in strengthening market competition and enforcing
processing facilities is thus crucial and can be taking the form of investment
in processing and providing more favourable conditions for market entrance. Coffee processing In
the Central Highlands, 85 percent of coffee output of the country is produced.
Problems concerning processing facilities still prevail. The majority of coffee
is primarily processed by unwashed method. Because of poor processing equipment
and storage conditions, quality of coffee product is low. As coffee is produced
mainly for export purpose, the quality is crucial in foreign exchange earning. Low
export price means low farm-gate price for peasant and that means the reduction
in investment for coffee production. Poor conditions of storage facilities also
means that peasant cannot keep their coffee, waiting for favourable market
conditions that would bring them higher profit. Improvement in coffee
processing, namely, primary processing may solve the problem of product quality
and thus price for peasant may be improved. To increase the quality of coffee,
a number of measures concerning cultivation, harvesting, processing, storage,
market penetration is to be carried out. It is a need to establish a sufficient
number of processing agents, specialising in processing coffee cherries into
exportable product. This aims at both quality and increase of competition.
Processing coffee into end products requires a lot of time and money and should
be carefully investigated in respects of technology and market penetration. Coffee Trading In
coffee exporting, the number of licensed coffee exporters are limited to 29 by
the regulation of the government in 1995 among which VINACAFE is the largest
exporter. The flow of coffee from grower to international trader is illustrated
in Figure 5 (in the main text). Although
there presents both public and private collectors specialising in gathering
initially processed product (dried coffee), purchasing market is not really
competitive. Local collectors in some extent, possess their monopsony power in
purchasing. Together with unfavourable conditions in grading, peasant receives
only a small proportion of export value of their product. With a system of
collecting coffee for export at present, farmers’ choices are restricted. While
coffee is one of big exchange earners, the cultivators just receive a relative
modest profit after a long period of cultivation. If purchasing market is
improved and competition in wholesale trading increases, higher profit would be
accrued to the farmers and this helps them in cultivating more intensively. Limitation in the
number of licensed exporters, on the one hand, may ensure the management of
quantity of coffee export in international market. On the other hand, this
monopoly in coffee trading may affect the development of market. In domestic
coffee market, private agents deal with about 90 percent of coffee product
(gathering and processing) for export (Vo Thanh Thu, 1997) while there is no
private export-licensed trader participating in export market. Increasing
competition in domestic purchasing market also implies the need to increase the
number of licensed exporters. It is far to talk about the elimination of
licensed export scheme but providing more opportunities for export entrance
without taking care of ownership status is worth consideration.
Improvement
of infrastructure is important to attract investment and for the efficient
operation of markets. Improvements in irrigation system, road network, power
line, and other supportive facilities will promote production, and in some
extent, would assist in promoting market competition. Irrigation system In
the Central Highlands, coffee cultivation requires a sufficient water resource.
Most of coffee are grown in high-altitude areas, ground water is mainly used
for irrigation. The consequence is the degradation of ground water resource.
The present irrigation system can afford only 51 percent of designed capacity
(NIAPP, 1996a). The establishment of damps/reservoir requires a huge investment
that can only be funded by the state as a development programme. With a potential
of stream and river systems, a recommendation of constructing combined
irrigation-hydropower damps serving both purpose of water for irrigation and
electric power has a strong argument. Transportation and Market Access Transportation
network in the Central Highlands is still in poor conditions. Although the main
roads in town centres are well built, almost roads in rural areas are in very
poor condition and this affects the process of development. A good
transportation system implies a better market access and a reduction in
production cost. To
provide more opportunities to the peasant, a great task is to improve the
infrastructure. The poor rural transportation condition causes a large
differentiation in living standard and income between residences in rural
communes, especially in remote areas and the provincial centres. Relative low
price of output and high price of input of production and basic-need
commodities are the consequences of the poor infrastructure. Strengthening
market requires investment for improving infrastructure. Power and Communication System The
implementation of mechanisation in agriculture production requires a
well-functioned power system. Due to difficulties in establishing a system of
power distribution for the broadly distributed zones of residential, especially
for ethnic minority groups, rural electrification process in the Central
Highlands is to be considered in respect to biological characteristics, the
customs, and income level of habitants in the region. The
establishment of power distribution network would push up productivity and
increase the capacity as well as efficiency of processing facilities. In
addition, a well-distributed power system would promote the utilisation of
communication media and thus peasants are more accessible to information.
The
most serious environmental problem
at present is the degradation of land resource and forest clearing. The
ever-seen degradation of soil as well as reduction of bio-diversification have
proved the more serious unforeseen consequences that may occur. The
zoning of forestry land for watershed purpose and those zones to be controlled
by strict regulations is suggested. However, because of large scale of forest
and the difficulties in practising the laws, a combination of zoning and
allocating forest land to households for caring and protecting is worth
consideration. To
eliminate shifting cultivation tradition, the allocating and distributing
forestry land to the households has proved its efficiency. The defining the
ownership of households to their allocated forestry is important since this
ensures the protection of their rights in exploiting the forest. The settlement of
residential zone is to be accompanied with the issuing of Land Use Right
Certificates to the peasants who are of ethnic minority groups. Priority
conditions should to be provided to the ethnic minority groups where shifting
cultivation tradition is taking place. The protection of
environment, particularly aiming at the preservation of forest and reducing
soil degradation, should focus not only on the maintaining and protecting the
existent forest but also to grow the new in barren land areas. A long term [private] ownership of
land use rights together with property rights on the products gained from the
land should be clearly defined and strictly practised. This also requires the
strengthening of legal framework in order that those rights are legally
protected.
Property
rights, technology transfers, credits and other institutional regimes are all important
in assisting peasant participating in agricultural production.
One
of the institutional weaknesses is weak property rights that cannot provide
enough incentives for the preservation of resources. Strengthening institutions
means improvement in collective conventions and rules that establish standards
of individual and group behaviour, aiming at reducing uncertainty with respect
to actions of the others. These relationships are referred to by economists as
property rights and the most obvious of these relate to the management of land
and water. Possession of property rights creates opportunities and incentives
and define who can take advantage of them. To promote
sustainable development in general and sustainable land use in particular, it
is necessary to strengthen existing incentives for conservation of resources or
introduce the new ones. Conservation of land resource is promoted if the land
user has security of use of a particular plot of land over the long term. If property
rights are to guide the use of natural resources effectively, they must be
well-defined, enforceable and transferable. Only when property rights are
well-defined do individuals understand fully the implications of their actions
in advance. Transferability of property rights can permit resources to be
mobile and to move to higher valued uses. Completed defining of property rights
helps in identifying the incentives that motivate individual and groups of
peasants. The preservation
of resources, is also determined by the peasant’s expected production cost, the
revenues and interest rates. The level of certainty about capturing benefit is
dependent on the pattern and the stability of property rights. The
establishment of property rights on forest land is a more complicated issue.
Forest land is much more difficult to be managed. A coincidence of tenure of
trees and land tenure must be attained. It is worthy consideration the defining
property rights on wood and land. With
the given five land use rights, the market for transfers of land use rights
certainly develops. It should be noted, especially the case of the Central
Highlands, that after accomplishing transfer-land use rights between agents, a
process of clearing forest for new arable land may begin. Thus the development
of land use rights market in the Central Highlands is an issue of careful
consideration.
The introduction of new technology helps to increase the productivity of production |