Summary of Sector Impacts

ISG-MARD (2002) predicts that economic integration and trade liberalization will have great impacts on the national economy in general and the agricultural sector, in particular. This is supported by Que and Que (2000), who note that an important series of economic and institutional reforms were launched by the government, encouraging farmers and agents to promote their agricultural activities and creating possibilities for market expansion.

Despite lower worldwide rice demand and fiercer competition, Vietnam had still in 2000 rather strong competitive advantage in rice export. Therefore, ISG-MARD (2002) predicts that, in the coming years, when Vietnam pursues economic integration and trade liberalization, the country still has many opportunities to speed up exports to other markets. Minot and Goletti (2000) argue that increases in prices of rice, resulting from trade liberalization, benefits the poor, rural farmers.

Surveys conducted by UNEP (2005) gave the overall impression that the socioeconomic impact of trade liberalization in the rice sector was perceived as positive but environmental impacts were seen as negative. However, positive impacts on forests were also expected, as rice intensification provides jobs and improves local food supply, thereby reducing pressures on natural forest exploitation for food.

Reductions of the World coffee price have caused the coffee price competitiveness index of Vietnam to decrease sharply from 1994 to 2000. Despite this and tight exchange rate policies, reducing price competitiveness of Vietnam’s coffee exports, Vietnam is now the biggest Robusta exporter in the World and coffee remains as noted a key export product of Vietnam. It has also been argued that trade liberalization can facilitate further penetration of coffee export markets due to increased efficiency.

The simulation by ISG-MARD (2002) predicts that international trade liberalization has substantial impacts on Vietnam’s agriculture and especially on exportable crops sub-sectors such as rice, coffee, and tea, providing various opportunities for their promotion and efficiency improvement. This is supported by the analysis by Que and Que (2000), adding rubber and groundnuts to the list of root crops.

ISG-MARD (2002) warns that the cyclic economic recessions and crises under trade liberalization are likely to have more powerful and earlier effects. Both ISG-MARD (2002) and Que and Que (2000) stress that although the infrastructure has been greatly improved, there is still a long way to go with infrastructure improvements. Que and Que (2000) emphasize additional problems. Administrative procedures have not been improved thoroughly and their implementation

has been delayed. The relationship between farmer households and organizations dealing with processing and export has been loose, with no firm contracts. The producers have not been sponsored, so when market prices go down below the production cost, they suffer losses. Nielsen (2002) argues there is another potential problem. In her interpretation, a key constraint that will restrict farmers from realizing the full potential of the reforms of the rice sector is that the Government continues to nominate state-owned food companies to deal with Vietnam’s key rice export markets.

The Oxfam (2001) report argues that the only direct positive impact channel of trade liberalization is to help increase non-farm employment, which is crucial for poverty reduction.

ICARD-MISPA (2004) found that the competitiveness of Vietnamese sugar is weak in terms of quality, productivity, efficiency, and processing costs. However, a shift from imports to exports of sugar has occurred in the latest years. SOEs still lack the impetus to move forward, thereby reducing the competitiveness of the sector. ICARD-MISPA (2004) stress that reform of the management mechanism in the sector is important. Experience shows that large scale companies are effective, while loss and big debts are often seen in small scale companies. They find that many households have shifted to rice production.

Thanh and Neefjes (2005) find that past trade regulation regarding maize had little impact on maize prices and little impact on maize farmer income and poverty. However, they emphasize that price fluctuations lead to vulnerabilities of the poor because of increasing maize imports together with high levels of subsidies in exporting countries remain.

The conclusion by ADB (2005) concerning the livestock sector was that due to the high degree of self sufficiency, the Vietnamese economy is stable towards potential shocks to the livestock sector caused by liberalization. Feed is one of the most important factors for the development of the livestock sector.

Analyzing the textiles and garments sector, Nadvi et al. (2004) emphasize that the 1992 Vietnam trade agreement with the EU gave it preferential garment quotas for the EU market. The US-VN BTA also increased Vietnamese exports of textiles and garments greatly. These high exports were maintained even after the US introduced quotas on 1 May 2003. Nadvi et al. (2004) cast doubt on the belief that competition from China is worsened by the fact that Chinese wages are lower. From their evidence, Vietnamese wage rates, at least in the state owned sector, are below those of China. Analyzing the textiles sector in particular, Thoburn (2005) stresses that in a country like Vietnam with considerable regional variations in the incidence of poverty migration from less

prosperous regions can be a powerful force to reduce poverty if migrants succeed in gaining employment in their new location. The finding is that 30 percent of the interviewed textile workers had migrated. Among these, the general consensus was that migrating has brought with it improved living conditions. This is but one of the factors not taken into account by most of the CGE studies.