SPEECH BY AMBASSADOR BILL TWEDDELL
‘Vietnam’s Agro-enterprises and WTO’
At ISG Plenary Meeting 25 October 2006
Your Excellencies, our co-chairmen, Minister Phat and Ambassador Marine;
Mrs Pham Chi Lan, Senior Economist
Dr Le Van Minh, Director General, International Cooperation Department, MARD
Distinguished participants,
Ladies and gentlemen,
First, I would like to acknowledge and thank the International Support Group (ISG) for the role it plays in supporting open dialogue with the donor community and improving the effectiveness of international support to the sector. The ISG’s continued efforts are highly appreciated.
Today I would like to make some observations based on Australia’s own experiences and then highlight how we are using that experience to support the sustainable and equitable growth of Viet Nam’s agro-enterprises.
Some observations from Australia’s experience
In the past 30 years, Australia has itself experienced much change in the agricultural sector. 30 years ago, our agricultural industries were heavily protected, inefficient in many respects, and much less open to the world. Since that time, through a significant process of tariff and subsidy cuts, removal of barriers to investment, and more general economic and structural reform, we have moved to have, along with New Zealand, one of the most efficient and open farming industries in the world. Subsidies now are on average worth only 5 per cent of farm production annually, and are targeted largely at disaster mitigation such as droughts, hurricanes and floods.
Like Australia before, Viet Nam will need to make a choice. Viet Nam can choose the path of openness and gradual, sensible marketisation of its agricultural sector. Or it can choose to rely on protection and subsidies with the associated implications for productivity, global engagement and the long-term success of the sector. We would obviously draw Vietnam’s attention to the outcomes from the approach we have followed, but of course this is ultimately a question for Vietnam to decide.
Vietnam’s experience
But much of this is well known to Viet Nam. Integration of Viet Nam’s agro-enterprises into the global economy is occurring rapidly in response to policy choices made over the past 20 years. In particular, the liberalisation of rice production and sales in the late 1980s and early 1990s led to a big leap in the productivity and integration of the Vietnamese agricultural system. This trend has continued with many other commodities.
And this internally-driven trend is now being reinforced by Viet Nam’s ongoing agreement-driven integration, with an expanding array of regional and bilateral trade agreements and, shortly, WTO membership.
The way ahead for Vietnam
But what does this mean? How will Vietnam need to respond to the changes already occurring, and those about to occur? How will Viet Nam’s agro-enterprises build on their current competitiveness and take full advantage of the opportunities that exist under the new economic environment?
I strongly believe the most important element to stress is that the primary responsibility for success lies with the farming and related sectors themselves in identifying, assessing and addressing these opportunities and challenges.
The second element is the role of the government in facilitating an environment that stimulates improved efficiency and productivity of the private sector. Improved coordination and more efficient regulatory processes will be particularly critical. In this regard, the ongoing process of decentralisation will present some particular challenges, in terms of coordination and coherence of policy and practices.
The same improvements will of course be needed if Foreign Direct Investment (FDI) is going to be attracted to the sector. For FDI to be attracted to agriculture, policy-makers will also need to stay involved with broader investment policy-settings, to ensure that key issues such as licensing, administration, conditions attached to investment, land and infrastructure, are all also working to boost and not hinder investment interest from abroad. The feedback we receive through our Austrade officers, and other sources, suggests these issues are of particular interest to the growing number of Australian businesses looking to invest in Viet Nam.
Elsewhere, proper identification of Viet Nam’s comparative advantages in agriculture will also be important. Without appropriate analytical foundations, it will be difficult to determine what sector investments are going to be most appropriate and cost effective. Of course, the bulk of farming investment will continue to be made by farmers themselves, but government also will need to develop a good understanding of markets, quality, value chains and continuity of supply. Once identified, these advantages will need to be supported by well-targeted private and public research and the application of appropriate technologies.
Environmental sustainability is another key issue. Australia’s experience also shows that growth of agricultural enterprises cannot be divorced from the long-term impact of practices that arise from a short-term vision. For example, Australia now has significant challenges with water availability, owing in part to adoption of methods and types of farming and industry in the past that have not taken full account of their impact on water supplies. Increasingly intensive use of natural resources such as fisheries, forestry and coastal environments has also required difficult but necessary safeguards to be put in place to ensure long-term sustainability of many agro-enterprises. The lesson for Viet Nam is that the economic and social costs of repair and restoration will be far higher than investments made in careful planning early on.
Finally, our own experience suggests that, in addition to the many and varied benefits flowing from openness and reform, there are likely to be social impacts. This is particularly true for Viet Nam, I would suggest, with a high percentage of its population dependent on agriculture for their livelihoods. Ensuring the economic opportunities offered by integration materialise in a way that benefits those who can take advantage, while assisting those who are not able to benefit in the short to medium term, will be an important balancing act.
But it also should be remembered that many other countries – including Australia – have undergone major changes in agriculture over the past century that have not resulted in uncontrollable change. Vietnam itself is a shining example of this in recent years – it is has experienced at least as much change over the past 20 years as it will over the next few years, so it already has the experience and know-how to deal with these issues.
As such, I am encouraged that many of these challenges and opportunities have already been identified by the Vietnamese government. It is through recognition of these challenges, and the demonstrated commitment to address them, that provides the foundation from which Australia and other donors can provide support.
To this end, I would like to highlight some of the ways in which Australia is working to help support the sustainable growth of Viet Nam’s agro-enterprises in the current and emerging operating environment:
On WTO-specific assistance
At the 2005 mid-year Consultative Group meeting, the Vietnamese government called for donor support in helping support the reforms needed to meet its WTO commitments.
Since then, the donor community, led by the Australian Agency for International Development (AusAID) and Britain’s Department for International Development (DfID), has worked closely with government to develop a joint donor financing facility managed by government and meeting the government’s needs for Technical Assistance. What is called the ‘Beyond WTO Facility’ will provide, as one of its first and most important inputs, assistance to the Vietnamese government to develop a comprehensive 5 year Action Plan for continued global integration and completion of the transition to a socialist-oriented market economy. This will be a critical document for Government to ensure a well coordinated and genuinely multi-sectoral approach to WTO implementation. It will also help to ensure that government and donors provide support and assistance to the process where it is needed most.
On agricultural research and systems
The Australian Centre for International Agricultural Research (ACIAR) has been present in Viet Nam since 1993. ACIAR will continue to place a strong emphasis on joint Australian-Vietnamese research that contributes to diversification of crops and livestock and improvements in the safety and quality of agricultural products. In fact, many of the ACIAR project innovations have already led to improvements in the competitiveness of Vietnamese agro-enterprises, and we expect this to continue into the future.
The Australian-Viet Nam Collaboration for Agriculture and Rural Development Program (CARD) provides funds, on a competitive basis, to activities that develop and apply agricultural technology and knowledge specifically to small-holder circumstances. As with ACIAR, these projects are jointly delivered by Australian and Vietnamese agricultural research institutions, and therefore provide strong links to Australia’s own experience and expertise.
Beyond the jointly implemented projects, AusAID has recently agreed to MARD’s request that the CARD program provide technical assistance for its recently-commenced reform and restructuring program of the Department of Science and Technology (DST) and the system of Research Institutions to improve the efficiency and effectiveness of research investment. This assistance will be supporting three key bodies, namely:
• MARD’s Department of Science and Technology,
• The Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), and
• The Vietnam Academy of Agricultural Science (VAAS), and I was delighted to have been present at its official launch recently.
AusAID has also recently supported MARD, through the Capacity Building for Effective Governance Facility (CEG), to undertake analysis on opportunities and adjustment challenges facing the agriculture sector as a result of economic integration. This support has culminated in the development of four policy studies which have assisted the formulation of a roadmap for MARD’s Action Plan on agricultural integration.
On Poverty Reduction Programs
In the area of poverty reduction, Australia is currently working with other donors to assist the Committee for Ethnic Minorities in their implementation of Phase 2 of National Targeted Program 135.
While providing financial and technical assistance directly to Program 135 at the national level, Australia will be supporting Quang Ngai province directly to achieve the objectives of Program 135 Phase 2 and enhance the effectiveness and quality of its implementation.
This engagement at policy and implementation level aims to highlight challenges and to pilot new approaches that ensure growth in agro-enterprises benefits both lowland and upland communities. Through our close engagement with MARD’s work on the 135 Program, we hope to contribute to the development of national and provincial level Rural Development policy and strategies.
Conclusion
Ladies and gentlemen, clearly there will be a variety of impacts for Vietnam flowing from greater global integration. Given the size of the rural population, it will be important that growth of the sector brings benefits to as many people as possible in rural areas. But Vietnam has already succeeded in this regard in the past two decades, and I can see no reason why this will not continue.
The Vietnamese government has made clear its desire to achieve broad-based growth. I can assure you that the Australian Government, in cooperation with Australian businesses, will remain an active supporter of the Vietnamese government in its efforts to ensure this broad-based growth occurs both now and into the future.