Reorganizing and innovating agricultural enterprises - Part 1: Identifying limitations and shortcomings

(Baonghean) - Decades ago, the vast lands of Western Nghe An were only wild forests or planted with acacia and eucalyptus; then with the emergence of agricultural and forestry companies, they were gradually covered with the immense green of coffee, rubber, tea, oranges, sugarcane, etc. Those companies were the leaders in transferring science and technology to farmers and contributed significantly to hunger eradication and poverty reduction in many districts in the West; but they also gradually revealed their shortcomings and became less competitive in the market.

On the vast land in Minh Hop commune (Quy Hop) assigned by the state to Xuan Thanh Agricultural Company Limited for management and use, the vast green of oranges; meeting Ms. Nguyen Thi Thom in Team 12 who was taking care of oranges, she said: Previously, on this land there were only bushes and then sugarcane. Sugarcane here can help reduce poverty, but the low productivity cannot make you rich. After the company's policy of converting crops, in 2012 her family invested over 100 million VND to switch to growing oranges. After 3 years of care, her family's oranges bore their first fruit. On the sunny and windy hills are orange trees that bear fruit, hanging from branches. “This Malaysian orange variety can be harvested earlier, around October, and the yield will probably be very high. The other 1 hectare of oranges on the other hill is planted with the Valenxia variety, which is not as high yielding but ripens late and is sold before and after Tet, at a very good price. Hopefully, the weather will be favorable and the investment will be worth it,” said Ms. Thom.

Taking care of tea seedlings in Anh Son.

Xuan Thanh Agricultural Company Limited is a class II enterprise, with 100% state capital, producing and trading agricultural products, and is assigned by the province to manage and use over 1,685 hectares of land. Company Director - Mr. Hoang Van Minh said: The entire agricultural land area (nearly 1,360 hectares) has been allocated to officials, workers and people in the region, the unit only retains a part of the area of ​​over 7 hectares to make a model for testing the application of scientific and technological advances (seedlings, fertilizers and pesticides). Land management and planning are strict and effective. The allocation of land and orchards is carried out publicly and transparently, to the right subjects, and in accordance with the planning on land use and crop arrangement.

This has created a driving force for investment in production development, increasing land use efficiency, orange products bring an average income of 200 - 250 million VND/ha/year, many hectares have achieved revenue of over 1 billion VND. Up to now, over 80% of the area has focused on developing specialized areas for the production of citrus fruits (oranges, tangerines) and long-term industrial crops (rubber). The whole unit has 725 hectares of oranges and tangerines; 491 hectares of rubber; 142 hectares of raw sugarcane, the average annual product volume is 5,000 - 5,500 tons of oranges and tangerines, 250 - 300 tons of dry rubber latex and 10 - 12 thousand tons of raw sugarcane. Average annual revenue is 100 - 120 billion VND, budget payment is 650 - 800 million VND, social insurance payment is 7 - 8 billion VND, average land use efficiency is 70 million VND/ha/year, labor income is 4 - 4.5 million VND/person/month.

Although a strong enterprise, the production of Xuan Thanh Agricultural Company Limited has shown a lack of sustainability. The company has actively coordinated with related units to protect and successfully build the protection of geographical indications for Vinh oranges, annually organize many training programs, transfer scientific and technological advances, promote domestic and international product brands, contributing greatly to increasing the selling price and efficiency of orange trees; but the output market is not stable. In addition, although it has done a good job of planning, agricultural extension, and strictly managing plant varieties, due to the implementation of the household economic model, the contracted households are fully proactive from planting, caring, harvesting and consuming products, so the company's management and operation process is limited. Economic benefits are mainly focused on the contracted households, the state has not had a very specific policy to collect value added tax and personal income tax from the contracted households of orange trees.

Importing raw sugarcane into production at Song Con Sugarcane Company

Located on the fertile red basalt land, Nghe An Coffee - Rubber Company Limited once had a golden period with the mechanisms of contracting, investing in developing coffee and rubber raw material areas, guiding technical processes as well as building processing facilities, and consuming products for contractors, creating a green color of coffee and rubber export value for Phu Quy area. At its peak, the coffee area was up to 1,000 hectares (now only 200 hectares). The unit has 5 affiliated farms, assigned by the province to manage and use over 4,000 hectares of land and has so far organized the contracting to households to produce over 3,739 hectares. According to Mr. Tran Duc Tien, Deputy General Director of Nghe An Coffee - Rubber Company Limited and Director of Tay Hieu 1 Farm, the Company has basically performed well, the management and use of land has been basically carried out strictly, with few disputes and misuse.

The entire area managed by the Company is stably contracted according to the crop cycle to cadres, employees and workers in the area, creating favorable conditions for management and production operation, encouraging contracted households to mobilize more capital and labor in intensive investment in orchards and efficient use of land resources. The work of shifting the crop structure is well implemented in the direction of increasing product value associated with promoting land advantages and potentials. Investment and garden care are fully ensured. At the same time, the connection between enterprises and contractors is strengthened, especially in the field of science and technology services for workers. Currently, the whole unit has over 635 hectares of short-term crops such as rice, sugarcane and other crops; nearly 3,000 hectares of industrial crops (nearly 2,500 hectares of rubber, nearly 200 hectares of coffee, over 200 hectares of fruit trees); in general, the quality of all products is good, still consumable despite low prices. The unit has also invested in a product processing line using Brazilian wet processing technology to ensure export quality to European countries; rubber processing is applied based on Malaysian technology, the finished product is latex that meets export standards.

However, like most agricultural and forestry units in the province, the current operations of Nghe An Coffee - Rubber One Member Co., Ltd. are also gradually revealing shortcomings; using fertile land but not yet bringing high efficiency, low profits, productivity and value of crops according to income are not high (coffee revenue is about 50 million VND/ha/year; rubber 30 million VND/ha/year); consumption capacity is still through entrustment for coffee, and rubber products are completely dependent on Chinese partners.

Nghe An currently has 12 agricultural and forestry LLCs including: forestry companies of Quynh Luu, Tuong Duong, Con Cuong, Do Luong, Song Hieu districts; An Ngai, Song Con, 1-5 Nghe An agricultural companies; Nghe An Tea Development Investment Company; 3/2 Agricultural Industry Company; Nghe An Coffee - Rubber Company. The total land fund that 7 agricultural LLCs are assigned to manage and use is over 16,155 hectares; the total land fund that forestry LLCs are assigned to manage and use is over 59,500 hectares; with a total number of employees in the units of 5,667 people. Although the contracting and management mechanism as prescribed in Decree 135/2005/ND - CP of the Government has not been fully implemented, in recent years, the companies have invested in the form of lending (seedlings, materials, fertilizers...) and collecting debts through products. At the same time, there are instructions and training on technical processes, purchasing and consuming raw materials for contractors, as well as managing and using assigned land areas in accordance with state planning.

The production and business activities of enterprises are relatively stable, the employment and income of employees are guaranteed. Enterprises implement well the social insurance, health insurance, and unemployment insurance regimes for employees, pay taxes in full, contribute to the budget, preserve and develop state capital, create more jobs for tens of thousands of workers who are households in the midlands, mountainous areas, and border areas, contribute to hunger eradication and poverty reduction, maintain political security, social order, and ensure national defense and security...

However, according to general assessment, the growth rate of these units is still not commensurate with the potential, the income value per unit area is still low, the competitiveness of the products is still weak. Besides, the apparatus is cumbersome, the labor force is large, unskilled and difficult to manage. The companies are using a fairly large area of ​​land but the area of ​​applying high technology to produce valuable products is still too small. Even Nghe An Tea Development Investment Company Limited is a fairly strong enterprise in the agricultural sector, exporting tea to Pakistan, China, Russia, Afghanistan, England... The export output in the first 7 months of 2015 reached 1,300 tons, the export turnover reached 2 million USD. Currently, the unit is managing and using 4,300 hectares, of which over 2,000 hectares are tea. But like other state-owned enterprises, the Company faces difficulties in competition, fierce competition for raw materials, lack of capital to invest in warehouses, upgrade technological lines and invest in raw material areas, and low living standards for workers. Therefore, changing the form of ownership in the new context is an important opportunity.

Or 1/5 LLC is currently planning to convert into a 2-member LLC with capital contribution from Nghe An Sugarcane Company Limited (NASU). The unit's leader said: This conversion will help the unit have a larger capital source to invest in production and business effectively, especially being able to convert 200 hectares of sugarcane of the unit to become a Sugarcane Research Center and Sugarcane Breeding Center to serve the development of NASU's raw material area; at the same time, effectively coordinate in upgrading and using the Company's Fertilizer Processing Facility.

Implementing Resolution No. 30 of the Politburo on the arrangement and innovation of agricultural and forestry farms, Decree No. 118/ND-CP dated December 17, 2014 of the Government on arrangement, innovation and development, improving the operational efficiency of agricultural and forestry farms, Circular No. 02 of the Ministry of Agriculture and Rural Development, Circular No. 17 of the Ministry of Finance, the People's Committee of Nghe An province has submitted to the Standing Committee of the Provincial Party Committee a proposal for arrangement, innovation and development, and improving the operational efficiency of agricultural and forestry companies. Accordingly, depending on each enterprise, there will be different arrangement directions.

Comrade Hoang Viet Duong, Vice Chairman of the Provincial People's Committee, said: Currently, the direction for arranging and equitizing agricultural and forestry enterprises in the whole province has been basically arranged in each reasonable position. The companies have reviewed the land area to be used, the land area to be returned, the number of surplus workers, the management apparatus after the arrangement, and the amount of state assets. The province has 5 forestry companies that will be maintained and strengthened to perform the task of protecting the forest. Agricultural companies, depending on their scale, capital, and efficiency, will have different forms of arrangement. For example, Nghe An Tea Investment and Development Company is a large-capital enterprise, so it should be equitized to attract investment capital; May Forestry Company is a small enterprise, mainly with workers' gardens, so it should establish a 2-member company, carry out joint ventures...

(To be continued)

Article and photos:Chau Lan - Phu Huong