Promoting restructuring of the agricultural sector

(Baonghean) - In order to remove bottlenecks for the sustainable development of the agricultural sector, one of the important and fundamental sectors of the current economy, it is necessary to restructure the agricultural sector towards increasing added value and sustainable development. Nghe An Newspaper respectfully introduces a summary of the speech of Prof. Dr. Nguyen Thien Nhan, Politburo member, Chairman of the Central Committee of the Vietnam Fatherland Front on this issue.

Over the past 20 years, Vietnam's agricultural production has achieved very important achievements, many products such as rice, pepper, cashew, coffee, rubber, tea, fish, shrimp have increased rapidly, of which 8 types of agricultural products are exported to the top 5 largest exporting countries in the world. However, besides that, there are many weaknesses, inadequacies, and long-standing problems. First, the phenomenon of good harvest but low prices occurs every year.

Production line at Hung Son Tea Processing Enterprise (Anh Son). Photo: Cong Sang.

Second, lack of capital is a common phenomenon for most farming households, despite the support policies of the State. Third, farmers' income is significantly lower than that of workers in industry and services. Agriculture accounts for about 47% of the labor force, contributing 19% to the gross domestic product, meaning that the labor productivity or average income of a farmer is less than 1/3 of that of workers in industry and services. Fourth, agricultural exports are unstable in price and quantity, and consumption is passive.

To speed up the progress of agricultural restructuring, it is necessary to clarify the causes of the four long-standing shortcomings mentioned above.

6 contradictions in agriculture

There are many reasons for the four long-standing shortcomings mentioned above. However, the most fundamental reason is the incompatibility of production relations and production organization of agriculture with current market economic conditions and international integration. The majority of farming households in our country, the basic production units in agriculture, are very small in economic potential, produce individually and are incompatible with the market economy and integration. Currently, in Vietnam, there are six contradictions in this issue. One is, production in a market mechanism but not knowing market demand.

We require farmers to produce according to market demand, but in reality, nearly 10 million farming households cannot know what the market demand is, how much it is, and where it is. Only cooperatives and enterprises with specialized departments trained in market analysis and using market information provided by state agencies can know what the market demand is. Second, farming households need to borrow capital but do not have enough conditions to borrow capital. A farming household with 2 workers, no more than 1 hectare of cultivated land, no collateral, no legal status, cannot be a real partner of banks to borrow under the State's preferential policies.

Banks cannot lend to 10 million individual farming households and believe that they can recover their capital in most cases. Only when households join together to form cooperatives, the cooperative guides members to produce according to plans, consume products according to signed cooperative contracts, supervise and help each other apply new varieties and techniques, then banks can lend to them through the guarantee of the cooperative's production and business plans. Currently, lending to fishing households to build new boats requires that fishing households be members of cooperatives or fishing production groups at sea.

Third, productivity increases continuously but income increases very slowly. Although crop and animal productivity may increase continuously, the income of farming households does not increase much. Only cooperatives with purchasing power tens or hundreds of times greater than a household have the economic strength to choose enterprises to sell inputs and buy outputs, and negotiate prices. Fourth, farmers must link with enterprises, but enterprises cannot link directly with tens of thousands of individual farming households. Fifth, the market requires agricultural products to have product quality and origin certificates. Only cooperatives as legal entities are partners of organizations that inspect and certify product quality and origin certificates. And finally, farmers need to apply scientific and technical advances, and only cooperatives with households growing the same type of crop and raising the same type of animal, with a number of their own technical staff, can be partners of scientists to be able to effectively transfer new varieties and new scientific and technical advances.

In short, as long as our country's agricultural production is mainly individual households, not linked together, the 10 million farming households will remain 10 million disadvantaged households and the very reasonable requirements for agricultural production, credit policies, training, and links with scientists will be very difficult to implement, the six contradictions mentioned above will continue to exist. The basic solution to these contradictions is to establish new-style cooperatives, according to the 2012 Law on Cooperatives and the new-style cooperatives created by farmers that were established before 2012.

Building new-style cooperatives is a breakthrough

With the 2012 Law on Cooperatives and new-style cooperatives - the creative results of a part of farmers, we have the opportunity to change the development stage of our country's agriculture right when entering the formation of the ASEAN Community and international economic integration on an unprecedented scale when we participate in free trade agreements with the Asia-Pacific region, the European Community, the Eurasian Union and other countries. With the 2012 Law on Cooperatives, our perception of cooperatives in general and agricultural cooperatives in particular has fundamentally changed, no longer contrary to but in line with the development laws of cooperatives in the world over the past 150 years.

Growing mushrooms in Yen Thanh district.

Agricultural cooperatives, through purchasing inputs in large quantities and having higher bargaining power than individual households, can provide seeds, fertilizers, chemicals, animal feed, gasoline, and machinery at cheaper prices to member households. Cooperatives can also form departments to repair agricultural machinery, build warehouses, and preserve agricultural products to meet the needs of member households. The general principle is that whatever the cooperative does is more profitable than the members themselves, or whatever the members cannot do, the cooperative will do, thereby making the production of member households more efficient.

The 2012 Law on Cooperatives shows that cooperatives under this law are new-style cooperatives, completely different from old cooperatives. The reality of establishing and operating new-style cooperatives under the 2012 Law on Cooperatives in many localities has proven that although these cooperatives only have a few dozen members, they have really helped member households produce and do business more effectively, especially in planning production according to market demand and consuming products for farmers. The process of restructuring agriculture towards large-scale production requires the most important subjects to be cooperatives. Shifting from mainly individual and individual household production to production linked through cooperatives, linking with enterprises through cooperatives. The subjects to receive State policies on land use management, capital, training, technical support, the subjects to link farmers with enterprises and scientists must be cooperatives. The subjects to mechanize production, irrigate, and modernize enterprise production in a highly efficient manner must be cooperatives and enterprises, not farming households with only 2 workers and less than 1 hectare of cultivated land.

Need to provide enough capital for production

Therefore, some tasks that need to be implemented soon in the coming time include: needing to include the content of converting, establishing and promoting new-style cooperatives according to the 2012 Cooperative Law in the Resolution of the Provincial Party Congress for the next term. At the same time, localities need to have plans and assign implementation responsibilities to the provincial, district and communal levels, organize training on the 2012 Cooperative Law and the Government's decrees guiding the implementation of the Cooperative Law, credit policies serving agricultural and rural development; the Cooperative Development Support Program for the period 2015 - 2020... In addition, ministries, branches and the Vietnam Cooperative Alliance need to clarify: which agency at the national level is responsible for conducting market research to provide appropriate market information to localities, cooperatives and agricultural enterprises.

On the banking side, under the direction of the State Bank of Vietnam, commercial banks need to vigorously implement lending to new-style cooperatives according to Decree 55/2015/ND-CP of the Government to create conditions for new-style cooperatives to accelerate development in the next 2-3 years. In addition, there needs to be mobilization and support from the Vietnam Fatherland Front and its member organizations such as the Vietnam Cooperative Alliance, the Vietnam Farmers' Union, the Vietnam Women's Union, the Ho Chi Minh Communist Youth Union and authorities at all levels. There needs to be a program of consultation and coordination between the Vietnam Fatherland Front, its member organizations and authorities at all levels in developing targets for mobilizing the establishment of cooperatives in each commune and district so that the mobilization can achieve the fastest progress and the highest results.

With the 2012 Law on Cooperatives and the results and examples of new-style cooperatives in many localities, if we promote the formation and implementation of new-style cooperatives, this is the most important fundamental factor, a breakthrough to restructure agriculture, improve the competitiveness of Vietnamese agriculture and increase sustainable income for Vietnamese farmers in the period 2016 - 2030.

Red River

(*) Title by Nghe An Newspaper.