Major findings

The introduction chapter of this thesis presents an overview of the existing literature and the characteristics of the Vietnamese export-oriented rice sector. Especially, chapter 1 emphasizes the importance of improving smallholders’ market linkages to modern value chains. Based on this point of view, we addressed the following research objectives. Firstly, we explored the determinants influencing smallholders’ contracting decisions within the export-oriented rice sector in Vietnam. Secondly, we analyzed the effects of CF participation on farming households’ performance based on two categories: household income and rice profit. Thirdly, we evaluated the influences of CF participation in farming TE levels. We also explored the determinants of technical inefficiency in export-oriented rice production.

The study employed Probit, OLS, MLE, PSM and SFA on a cross-sectional data set from a sample of 250 export-oriented rice smallholder farmers in the MRD of Vietnam to address the research objectives. Based on the research findings, farm characteristics, market information access, and household characteristics are proved to have strong influence on smallholders’ contracting decisions. Additionally, there is a significant influence of CF participation on household income and rice profit. It is interesting that CF participation plays an important role in improving household income by 20.87%, rice profit by 30.54% and TE level by 2.44% in Vietnam. The SFA results also reveal that about 13% of the potential output is lost due to technical inefficiency determinants. In total, the scale-effect is about 1.026, which reveals that if farmers increase 1% of production inputs, the TE score can increase by 1.026%.

74 In chapter two, the study contributes to the existing research about CF scheme with regard to the determinants of contracting decisions. The accessibility of world market price information is found to play a key role in smallholder farmers’ marketing decision. The variables “the accessibility of world market price information” significantly increases the probability of CF participation, which is found as a contribution to the existing literature.

The results highlight the influence of various categories on smallholder farmers’ contracting decisions. Although farmers with long-term farming experience and sufficient family members have greater priority to join traditional marketing channels based on their own experiences, it cannot be denied that participating in the CF scheme offers farmers higher benefits based on fair-price frames in comparison to the more volatile spot markets. CF is also helpful for smallholder farmers to more conveniently access the market instead of relying on the traditional market through middlemen and other spot transactions. Several characteristics are found to influence smallholders’ marketing decisions. Firstly, we find that low percentage of credit accessibility could be one of the reasons that lead to the current situation that a vast majority of farmers prefer dealing with middlemen in spot markets to get more flexible credit inputs. Secondly, more extension service accessibility could offer better farming practices and more farming experience. Family labors play an important role in smallholders’ marketing decisions. Thirdly, gender and education do not influence the contracting decision. Finally, it is also interesting to learn from the case that for farmers who have greater access to market information are more willing to participate in modern marketing channels.

In chapter three, we evaluate the influences of CF participation on households’ performance based on two criteria: household income and rice profit. The finding contributes to the existing literature that not only larger-scale rice farmers but also small-scale rice farmers can get benefits from contract participation. We find that there is a positive and significant influence of CF participation status on household income and rice profit. It becomes evident that CF participation supports smallholder farmers to increase their income by 20.87% and rice profit by 30.54% in comparison with the non-contract group. In addition, we discover some major socio-economic characteristics that strongly affect households’ performance.

Apart from the positive significant sign of “the accessibility of world price information” (i) variable, we also find that “farming size” (ii) and “the accessibility of extension services”

(iii) are key determinants of improving farming households’ performance. Results on the effects of farm size and extension services once again confirm previous research results,

75 whereas our insights into the role of access to information on world market prices is considered to fill an existing research gap. As a result, it is very important to take into consideration the availability of market price information to encourage CF participation. Due to the economic benefits resulting from the CF scheme in the Vietnamese export rice production sector, a further development and enhancement of the CF scheme is strongly suggested. Thus, more favorable CF terms and conditions and more availability of market information and extension services offered by contractors could be helpful to attract more participants.

Chapter four includes the analysis of the mechanism on how CF participation influences farming TE levels and the technical inefficiency determinants. The study contributes to the body of previous literature by exploring the determinants of CF participation and the effects of CF on farm TE levels among the export-oriented rice sector in Vietnam. These aspects have never been thoroughly analyzed before. The SFA results reveal that about 13% of the potential output is lost due to technical inefficiency. The TE of export-oriented rice production in the MRD ranges between 56.48% and 96.47%. In total, the scale-effect is about 1.026, which reveals that if farmers increase 1% of production inputs, the TE score can increase by 1.026%. Thereby, on average, contract participants have higher TE (88.46%) in comparison to non-contract participants (86.02%). In the two-sample t-test of TE-mean values, the significant differences at the 5% level with a t-value of 3.01indicate the higher TEs for contract farmers. Land, seed, fertilizer, machine, and labor are identified as the major inputs of the production frontier. Moreover, the farm and household characteristics in the sample also show influences on the TE of rice farming, however non-significantly.

Remarkably, in our study, not only “educational level” and “rice farming experience”, but also “off-farm income” is found as positive determinants influencing rice farming TE in contrast to the low negative effect of credit accessibility. By participating in CF scheme, not only larger-scale but also small-scale farmers in developing and emerging economies can improve their production patterns.

Overall, based on the study, the development and enhancement of the Vietnamese CF scheme proposed in the decision No. 80/2002/QD-TTg named "Policy on the Promotion of Agricultural Produce and Purchase through Contracts" and decision 62/2013 QD-TTg are highly recommended. Simultaneously, also the availability of market price information and extension services are very important to encourage farmers’ contracting participation.

Additionally, the CF scheme is also a tool to support improving household livelihoods and

76 the TE level of agricultural production in the rural areas of Vietnam, especially, with regard to export-oriented rice production. The findings are in line with the existing literature about marketing preferences, contract farming, productivity, and TE in emerging and developing countries (Mayer and Zignago, 2005; Wollni and Zeller, 2007; Khai and Yabe, 2011; Wollni and Brümmer, 2012). As suggested by Demont and Rutsaert (2017) to differentiate the price and improve Vietnamese rice quality, CF would be a potential method to deal with the issue.

Derived from the research findings, we have proposed some policy recommendations for different stakeholders in the export-rice value chain such as the government, local authorities, processing and exporting companies, and farmers to improve the national rice sector.