Overview Objectives

Vietnam has achieved remarkable economic growth since it liberalised its markets, and further economic growth and opportunities are predicted both within and outside the agriculture sector. However, significant structural adjustment pressures are expected in the short to medium term. The effect of these pressures on rural household income will be regionally and commodity specific, with some households gaining from increased opportunities while others will be worse off. Understanding the nature and magnitude of the distributional impacts of trade liberalisation, the difference between short run and long run costs and opportunities associated with structural adjustment is essential for designing effective policy. This project will assess structural adjustment issues associated with trade liberalisation, using quantitative economic models. This will involve identification of vulnerable groups and industries and assessment of domestic policy options for facilitating structural adjustment. The economic cost associated with ‘avoidance’ policies will also be quantified. A set of existing/known/developed modelling tools will be used to focus on different scales of the problem, which will draw on existing trade models, but the main emphasis will be on developing capacity for analysing incomes and responses at the household level. The effectiveness of the economic models and subsequent domestic policy will also be assessed.

Progress Reports (Year 1, 2, 3 etc)

Vietnam has achieved remarkable economic growth and has undergone significant structural changes in its economy in the past two decades. The agriculture sector now faces strong competition for its land and labour resources. For example, one of the concerns of the Ministry for Agriculture and Rural Development is the loss of prime agricultural land to industrialization. Farmers in the Mekong Delta have complained of rural labour scarcity. The agricultural sector also faces strong pressures on the marketing side. In the domestic economy, strong growth in incomes has fueled a rapid rise in the livestock sector, and there have been significant investments in commercial scale livestock farms in recent years. The recent global food crisis has raised concerns about domestic food prices and related agricultural policy. With its recent accession to the WTO, the effects of the global market are likely to have a stronger influence on other parts of the Vietnamese economy, fuelling stronger growth in non-agriculture sectors, creating additional structural adjustment pressure in agriculture.
This project was designed to develop capacity in the partner institution for quantitative analysis of structural adjustment issues and to provide policy advice on these issues. In response to concerns about the medium term prospects of the agricultural sector, the quantitative approach is focused on developing a medium term projection model. This tool will be used to assess a range of issues including the outlook for different agricultural industries, the impact of land loss on agricultural output, the influence of productivity growth on medium term production and food prices, and demand for rural labour at the regional level. The quantitative approach provides a means of identifying vulnerable groups and industries and of assessing domestic policy options for facilitating structural adjustment. The medium term projection model will be supplemented by global trade modelling which will be used to assess the impact of the WTO accession on domestic resource prices and agricultural trade opportunities.
The project builds on the capacity building achievements of a previous project (ADP/2001/066) with the partner institution, which provided the basic skills required for the activities to be undertaken in the present project. A review of that project suggested that further development of quantitative policy models should move away from formal training courses and use a locally based mentor to supervise the design of more sophisticated models. To deliver on this suggested approach, the project leader, Dr Donna Brennan will be based in Vietnam during the project as a visiting fellow at the partner institution. This will enable an effective mentoring relationship to be developed and increase the likely impacts of the project.
Most of the work done to date on the project has been on training and on developing the medium term projection model. The medium term projection model requires quantitative assessment of food demand and prospects for growth in demand as incomes grow; as well as development of models of supply and market equilibrium. The food demand work has been completed and results were presented in IPSARDs outlook conference in March 2009. The market model has also been completed, and the supply side work is well underway. The emphasis of work in the next stage will be on completing the supply side models (and associated training) as well as undertaking the global trade modeling work. The emphasis in the next stage will be on using the models for the purpose of conducting policy analysis of structural adjustment issues.

Vietnam has achieved remarkable economic growth and has undergone significant structural changes in its economy in the past two decades. The agriculture sector now faces strong competition for its land and labour resources. For example, one of the concerns of the Ministry for Agriculture and Rural Development is the loss of prime agricultural land to industrialization. Farmers in the Mekong Delta have complained of rural labour scarcity. The agricultural sector also faces strong pressures on the marketing side. In the domestic economy, strong growth in incomes has fuelled a rapid rise in the livestock sector, and there have been significant investments in commercial scale livestock farms in recent years. The recent global food crisis has raised concerns about domestic food prices and related agricultural policy. With its recent accession to the WTO, the effects of the global market are likely to have a stronger influence on other parts of the Vietnamese economy, fuelling stronger growth in non-agriculture sectors, creating additional structural adjustment pressure in agriculture.
This project was designed to develop capacity in the partner institution for quantitative analysis of structural adjustment issues and to provide policy advice on these issues. In response to concerns about the medium term prospects of the agricultural sector, the quantitative approach is focused on developing a medium term projection model. This tool will be used to assess a range of issues including the outlook for different agricultural industries, the impact of land loss on agricultural output, the influence of productivity growth on medium term production and food prices, and demand for rural labour at the regional level. The quantitative approach provides a means of identifying vulnerable groups and industries and of assessing domestic policy options for facilitating structural adjustment. The medium term projection model will be supplemented by global trade modelling which will be used to assess the impact of the WTO accession on domestic resource prices and agricultural trade opportunities.
The project builds on the capacity building achievements of a previous project (ADP/2001/066) with the partner institution, which provided the basic skills required for the activities to be undertaken in the present project. A review of that project suggested that further development of quantitative policy models should move away from formal training courses and use a locally based mentor to supervise the design of more sophisticated models. To deliver on this suggested approach, the project leader, Dr Donna Brennan was based in Vietnam from October 2007 to April 2009 as a visiting fellow at the partner institution.
Over 2009-10 work has continued to focus on training and on developing the medium term projection model. Most of the effort was on developing a baseline dataset that represents the farming systems in each of the 8 agroecological regions, and depicts the characteristics of small scale, semi-intensive and intensive livestock production. A draft dataset is now complete, and is being incorporated into a GAMS model of the Vietnamese agriculture sector, which is also nearing completion. Future activities on the project will include model handover and development of a reference manual, regional workshops to discuss and validate the farming systems representation and refine the model, and the completion of research papers on structural adjustment policy.

Vietnam has achieved remarkable economic growth and has undergone significant structural changes in its economy in the past two decades. The agriculture sector now faces strong competition for its land and labour resources. For example, one of the concerns of the Ministry for Agriculture and Rural Development is the loss of prime agricultural land to industrialization. Farmers in the Mekong Delta have complained of rural labour scarcity. The agricultural sector also faces strong pressures on the marketing side. In the domestic economy, strong growth in incomes has fuelled a rapid rise in the livestock sector, and there have been significant investments in commercial scale livestock farms in recent years. The recent global price spikes have raised concerns about domestic food prices, food security and related agricultural policy. As a member of ASEAN, Vietnam is party to several free trade agreements, and the effects of regional integration are likely to have a stronger influence on other parts of the Vietnamese economy, fuelling stronger growth in non-agriculture sectors, creating additional structural adjustment pressure in agriculture.
This project was designed to develop capacity in the partner institution for quantitative analysis of structural adjustment issues and to provide policy advice on these issues. In response to concerns about the medium term prospects of the agricultural sector, the quantitative approach is focused on developing a medium term projection model. This tool will be used to assess a range of issues including the outlook for different agricultural industries, the impact of land loss on agricultural output, the influence of productivity growth on medium term production and food prices, and demand for rural labour at the regional level. The quantitative approach provides a means of identifying vulnerable groups and industries and of assessing domestic policy options for facilitating structural adjustment. The medium term projection model will be supplemented by global trade modelling which will be used to assess the impact of Vietnam’s free trade agreements on domestic resource prices and agricultural trade opportunities.
The project builds on the capacity building achievements of a previous project (ADP/2001/066) with the partner institution, which provided the basic skills required for the activities to be undertaken in the present project. A review of that project suggested that further development of quantitative policy models should move away from formal training courses and use a locally based mentor to supervise the design of more sophisticated models. To deliver on this suggested approach, the project leader, Dr Donna Brennan was based in Vietnam for varying periods from October 2007 as a visiting fellow at the partner institution.
Over 2009 work continued to focus on training and on developing the medium term projection model. Most of the effort was on developing a baseline dataset that represents the farming systems in each of the 8 agro-ecological regions, and depicts the characteristics of small scale, semi-intensive and intensive livestock production. A draft dataset was completed, and incorporated into a GAMS model of the Vietnamese agriculture sector, which is also nearing completion.
The modelling has two components. Estimates of demand side (consumption) relationships were completed in 2009. Supply side (production) relationships are derived using a mathematical programming technique in GAMS.
Progress in 2010 was interrupted when the project leader, Donna Brennan, fell ill and subsequently died, in December 2010. After some delay, leadership of the project passed to Dr David Vanzetti, from the Australian National University.
Future activities on the project will include model handover and development of a reference manual, workshops to discuss and validate the farming systems representation and refine the model, and the completion of research papers on structural adjustment in response to trade liberalisation following Vietnam’s implementation of various free trade agreements.

This project was designed to develop capacity in the partner institution for quantitative analysis of structural adjustment issues and to provide policy advice on these issues. In response to concerns about the medium term prospects of the agricultural sector, the quantitative approach is focused on developing a medium term projection model. This tool will be used to assess a range of issues including the outlook for different agricultural industries, the impact of land loss on agricultural output, the influence of productivity growth on medium term production and food prices, and demand for rural labour at the regional level. The quantitative approach provides a means of identifying vulnerable groups and industries and of assessing domestic policy options for facilitating structural adjustment. The medium term projection model will be supplemented by global trade modelling which will be used to assess the impact of the WTO accession on domestic resource prices and agricultural trade opportunities.
The project builds on the capacity building achievements of a previous project (ADP/2001/066) with the partner institution, which provided the basic skills required for the activities to be undertaken in the present project. A review of that project suggested that further development of quantitative policy models should move away from formal training courses and use a locally based mentor to supervise the design of more sophisticated models. To deliver on this suggested approach, the project leader, Dr Donna Brennan will be based in Vietnam during the project as a visiting fellow at the partner institution. This will enable an effective mentoring relationship to be developed and increase the likely impacts of the project.
Most of the work done in the first year on the project was on training and on developing the medium term projection model. The medium term projection model requires quantitative assessment of food demand and prospects for growth in demand as incomes grow; as well as development of models of supply and market equilibrium. The food demand work has been completed and results were presented in IPSARDs outlook conference in March 2009. The market model has also been completed, and the supply side work is well underway.
Over 2009-10 work has continued to focus on training and on developing the medium term projection model. Most of the effort was on developing a baseline dataset that represents the farming systems in each of the 8 agro-ecological regions, and depicts the characteristics of small scale, semi-intensive and intensive livestock production. A draft dataset is now complete, and is being incorporated into a GAMS model of the Vietnamese agriculture sector, which is also nearing completion. The modelling has two components. Estimates of demand side (consumption) relationships were completed in 2009. Supply side (production) relationships are derived using a mathematical programming technique in GAMS.
Progress in 2010 was interrupted when the project leader, Donna Brennan, fell ill and subsequently died, in December 2010. After some delay, leadership of the project passed to Dr David Vanzetti, from the Australian National University. Following the disruption of 2010-11, the year 2011-12 saw a major effort to resurrect the model, now called VAST (Vietnam Agricultural SecTor model). This required the services of a specialist programmer who understood the programming language, GAMS, and had experience with agriculture sector models. Dr Elizabeth Petersen, from Advanced Choice Economics Pty Ltd in Western Australia, was hired to assist. After becoming familiar with the GAMS code, the model structure and the data, she was able to successfully simulate VAST over ten periods. The model also required an interface and documentation as to its use. An important objective is to get VAST used within IPSARD. Handing over the model involved teaching GAMS in addition to the model structure, data and potential applications. This was done in a workshop at IPSARD in May attended by ten potential users and presented by David Vanzetti and Liz Petersen.
Earlier, in October 2011, Tom Kompas from ANU presented a training course on econometrics and micro-simulation, and David Vanzetti and NN Que prepared a paper on structural adjustment in response to trade liberalisation following Vietnam’s implementation of various free trade agreements. This paper was presented at the Asian Society of Agricultural Economics conference held at IPSARD in October 2011.
The major output of the year was a long conference paper documenting VAST and illustrating its use. The application was to the issue of rural-urban migration. The paper was entitled ‘Rural-urban migration and Vietnamese agriculture’ and co-authored by Donna Brennan, Elizabeth Petersen, Nguyen Ngoc Que and David Vanzetti, and was presented at the Australian Agricultural and Resource Economics Conference held in Fremantle in February 2012. It addresses the concern that the movement of labour out of rural areas may lead to a fall in output and pose a threat to food security. The model results suggest that the shift from rural to urban areas may be beneficial for consumers and have only a limited impact on producers. The consumer impact derives from the increase in incomes that migrant workers can obtain in urban locations. The impact of migration on agricultural output appears to be minimal with slight increases in meat production and slight decreases in feed output. Furthermore, producers who remain in the rural areas may be better off because any decrease in production is offset to some extent by an increase in prices, although this does not happen where the domestic price is determined by international prices, as is the case of rice, the major crop in Vietnam. Simulation results suggest that migration is unlikely to have a significant adverse impact on prices. The Government policy of restricting migration seems difficult to justify on the grounds of food security.
Potential applications of the model include the impacts of changes in productivity (positive or negative), population, income, import and export prices, marketing margins, and post-harvest losses. Future applications of VAST within the time frame of the project will include an application to climate change and another to loss of agricultural land to urbanisation and other changes of use. Other activities on the project will include updating the database. In addition, two staff will attend a Dynamic GTAP training course in Copenhagen, and another will attend the International Association of Agricultural Economists meeting in Brazil in August 2012.

Project ID
AGB/2005/113
Project Country
Inactive project countries
Commissioned Organisation
Australian National University, Australia
Project Leader
Dr Thomas Kompas
Email
tom.kompas@anu.edu.au
Phone
6125 6566
Fax
6125 5570
Collaborating Institutions
Institute of Policy and Strategy for Agriculture and Rural Development, Vietnam
Project Budget
$396,071.00
Start Date
01/03/2008
Finish Date
28/02/2010
Extension Start Date
01/03/2010
Extension Finish Date
31/10/2012
ACIAR Research Program Manager
Dr Rodd Dyer