VietNamNet Bridge - Land is scarce in Vietnam. It is a valuable
asset and a fundamental part of the national wealth. The market value of land
increased rapidly in recent decades.
As mentioned, the value of land
depends on the production capacity of the land (which is exploited by farmers),
the quantity and quality of the infrastructure system and agricultural support
services. The Government plays a key role in supporting more investment in
agricultural activities.
Plentiful references in the World
Development Report 1994 and 2009 emphasized the fundamental contribution of
infrastructure and agricultural support services to growth and development,
especially in the rural areas.
Improvements in quality and
access to infrastructure services reduce costs in connecting producers with
consumers, providing social service and landscape for the majority of the
population. Reducing the cost of connection promotes trade, finance and
distribution network. This helps to expand opportunities for businesses, create
income and wealth.
These reports explain why the
location (being defined as a specific location in geographic space) is valuable
and the economic and social forces make this value change over time.
Specifically, the reports focused on "economic supply of land" in
economic development and growth. By doing so, the reports identified how the
public investment to expand infrastructure and improve the rural landscape
enhance the value of land for farmers and rural communities, while increasing
wealth and welfare for them.
The topic of the World
Development Report 2009, "Reshaping Economic Geography," is very
appropriate for the program of industrialization and modernization of the
Vietnamese Government. The report indicates three factors that determine
patterns of growth and development, namely: economic density, the distance (in
economic terms), and the separation (in economic and social terms).
Several suggestions can be drawn
when considering growth and development patterns based on the aspects of
density, distance and division. Firstly, economic development itself is
inherently in tune of space. Some sites usually have an advantage over others,
such as markets, transit areas, seaports, airports, raw material zones and
administrative centers.
Secondly, “the market determines
economic context." Markets always needs time to grow and mature, but once
it is formed, it can benefit from the "urban development, the mobility of
human resources and strong trade ..."
Thirdly, "... human
resources focus on the places of excess, not the place of shortage ..."
This is also the result of the convergence effect. Knowledge and skills of a
person is more valuable where there are many people with similar skills and
knowledge.
Fourthly, reducing the cost of
transport will enhance the benefits of specialization and expansion of
production scale. These benefits promote trade and exchange between neighboring
regions (or countries) than between regions (or countries) that are far from
each other.
The World Development Report 2009
has many implications for policy. When economic activities tends to
geographically concentrate (due to the focusing effect, the overflow effect of
knowledge and skills, and the scale of economies), effective national
development policies require the Government to create resources in areas with
high economic density, and use them to promote the development (increasing
welfare) in areas with low economic density.
This approach should be backed by
"the blind space institutions" to help avoid bias between regions or
locations; promoting space investment network helps connecting regions,
districts; and set the spatial target interventions to encourage social and
human development across the country.
Some of the trends are well on
track in Vietnam. Some locations have high economic density such as Ho Chi Minh
City, Hanoi, Hai Phong, Da Nang and Vung Tau. Other cities although develop but
they have much lower economic density. Some revenues from the growth poles have
been used by the Government to promote wider development, such as the expansion
of infrastructure, particularly electricity and roads, improvement of public
services such as health and education.
The third trend is stronger
commercial links (internal) in Asia. Transportation costs per unit have
decreased by increasing the volume of goods and removal of trade barriers.
The fourth trend is the urban
areas continue to attract a lot of rural laborers. As being mentioned before,
these are mainly young and qualified workers.
However, contrary to the conclusion
in the report of the World Bank is Vietnam's public investment in rural areas
is declining, does not match the proportion of rural population in the total
population (72% in 2008) and the contribution of agriculture to GDP (18% in
2008.) For example, in 2005 public investment in rural areas accounted for only
7% of the total investment. Data from the National Assembly for 2000-2005 shows
that only 9% of the state budget for "basis investment" was spent in
agriculture and rural development. Foreign investment in agriculture is also
very limited (only 10% of the total foreign investment).
The difference between rural and
urban investment has negative effects. It reduces agricultural productivity,
reduces opportunities for farmers and rural people to generate income and
wealth locally, makes more serious problems of poverty, reduces the potential
for urban development, industry. This also goes against the investment model in
the high-growth countries. Crowded and congested cities due to the flow of
migrants from rural areas increase the cost for urban development.
By a decline in resources for
other areas, agricultural growth is losing dynamism. From 1990 to 2000,
agricultural output increased by an average of 5.9% per year, while from 2000
to 2008 it grew only 4.2% per year. Based on the standard of "development
model," this growth rate is lower than the growth rate of other key
economic sectors and the whole economy in general. The sudden decline in growth
is surprising when Vietnam still needs to do a lot of work in restructuring and
large segments of the population still rely on the strong growth of agriculture
to escape from poverty.
International experience can make
this concern increased. Evidences show that (mainly in India, China and
Indonesia), one of the most effective solutions to increase welfare for rural
areas and reduce poverty is to expand rural infrastructure. This requires a
huge investment and then the cost for operation and maintenance.
Draining resources from
agriculture is a result of the growth strategy with short-sighted vision. Urban
and industrial development is being driven ahead of the development of rural
areas. To obtain long-term sustainable development, both regions have to
develop quickly. Agricultural growth should remain strong so the distribution
of labor between regions going towards voluntary trend rather than being forced
due to poverty.
Because the public policy is “do
rather than what they say,” there is ample evidence that agricultural
development has been abandoned.
There are two highlights to
prove. The first is the asymmetry in the distribution of public investment
mentioned above. Secondly, the dominant role of international organizations in
the financing of essential items of agriculture and rural development.
Evidences can be cited from the "Agriculture and Rural Development Plan
2007" of the Ministry of Agriculture and Rural Development, with the
estimate of VND4.05 trillion of which foreign aid accounted for VND1.86
trillion (46%). This rate has been increasing and will continue to increase.
At the Consultative Group meeting
in Hanoi, in November 2009, donors pledged $ 2.25 billion to support the
agricultural sector from 2010 to 2015. No economic sector in Vietnam that is
heavily dependent on foreign aid, such as agriculture. The government can
change this by rebalancing its investment objectives.
Although the basic investment in
transport systems, irrigation, storage for inputs and products, processing
facilities, communications, health and education will help increase net profit
of agriculture, other areas should also receive support from public investment.
One of the areas is agricultural
researches for applications. There are many technologies and new techniques
needing to be studied and tested to determine the applicability in the
conditions of Vietnam. The Government can make use of public-private
partnership to provide this service. This approach will help farmers improve
crop and livestock varieties and farming techniques, and make the private
sector more interested in the prosperity of the agricultural sector. That will
help increase the value of agricultural land and increase the income and
welfare of farmers, especially women in rural areas.
Although there have been a number
of scientific and technological progresses in agriculture, especially the
efforts to upgrade the team of and connect Vietnamese scholars with
international colleagues, research and development, as well as other fields of
study, is not adequately interested in, especially when comparing with
international standards.
Increased investment to improve
infrastructure and other services for agriculture requires financing. The
majority of the costs for the development of industrial parks are suffered by
farmers who lost their land. They only get a very low compensation. Part of
"land rent" is transferred to the investors as they build
infrastructure from the conversion of agricultural land. It is necessary to
change this mechanism to increase the value of agricultural land and stimulate
farmers to invest to increase agricultural productivity.
Ho Dang Hoa, Le Thi Quynh Tram,
Pham Duy Nghia and Malcolm F. McPherson
Business & Investment Opportunities
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