VALUE CHAIN IN RICE PRODUCTION COOPERATIVES IN LARGE SCALE RICE FIELD IN MEKONG DELTA HOANG VU QUANG Can Tho, 14/9/ 2016

Content Current situation on linkage and large scale rice field Existing capacity of farmer groups and agriculture cooperatives Some case studies on linkage in rice production Short-comings and challenges Recommendations

OBJECTIVES AND METHODS

Context Agricultural restructuring: organizing production, linkage in value chain Decision 62/2013: enhance linkage, LSRF Limited linkage and area of LSRF Many reasons: - Limited capacity: companies, cooperatives and farmer groups - Policies - Linkage models ICMP : support LSRF, AC, FG Need to identify policy, measures to promote linkage, LSRF, AC, FG

Study method 4 provinces: Ca Mau, Bac Lieu, Soc Trang, An Giang 80 AC (rice production) 102 FG (rice production) Prioritize to select AC & FG with linkages Direct interview of managers ACs, enterprises Discussion with competent authority at levels Analyze by province, AC and FG

ENCOURAGING POLICIES

Accessment to supporting policies Encourage to volunteer LSRF program approved Projects in LSRF areas Signed contracts LSRF + linkage Duration for project implementation: Min. 5 years Companies should have material zones (50% after 5 years), capacity to dry, storage, processing and investment to farmers Finance: local budget

Supporting policies Content Co. AC HHs Free duty for using or renting land x Prioritize for ones who participate in exporting rice of government Support budget to improve fields, infrastructures (roads, irrigation cooperatives) Support budget for trainings for farmers Support budget to strengthen capacity of AC Plant protection products Seeds Rice storage (1 month) Trainings and providing information Favorable credit X

Local policies Ca Mau: planning for 40,000ha; issued a similar policy to 62 Bac Lieu: supporting LSRF with VietGAP; non-LSRF + linkage Soc Trang: planning for special rice production; supporting LSRF and linkage; also supporting LSRF without linkage An Giang: issued policies to even support FG All provinces have projects to develop FG & AC

CURRENT LINKAGE

Area of LSRF: low Year Ca Mau Bac Lieu Soc Trang An Giang 2011 1525   1525 13150 2012 834 4862 22950 2013 726 11591 34000 2014 12168 17996 32781 2015 8567 6164 23723 40615 % area of rice (in 2015) 6,6 3,4 16,0 6,5

Applied criterias of LSRF Content AC FG Use the same rice variety 79.4 95.7 Apply the same farming techniques 85.3 93.5 Have the same crop calendar 91.2 82.6 Harvest rice at same time 94.1 84.8 Have regulation on using plant protection products and pesticide 29.4 34.8

Difficulties in developing LSRF % AC % FG Weak infrastructure (canals, roads) 44.1 8.7 No planning for LSRF by commune authorities 8.8 10.9 Complicated rice production process 11.8 Difficult to change farming habit of farmers 14.7 4.3 Can’t find companies to buy product 29.4 2.2 Receive no support 0.0 Others 23.5 5.7

% AC & FG invested by partners Province AC FG Ca Mau 40.0 50.0 Bac Lieu 66.7 100.0 Soc Trang 64.7 87.5 An Giang 71.4 78.6 Total 65.2 85.4

Investment by buyers Content AC FG Water fee for members in AC or FG 10.0 7.3 Seeds 73.3 95.1 Fertilizer 43.3 41.5 Plant protection products 43.9 Allowance 26.7 24.4 Comission for using materials 6.7 2.4 Others 3.3

Government’s supports: technical trainings  #  Content % AC % FG 1 Seeds 14 17.9 2 Fertilizer 5.3 4.5 3 Plant protection products 1.8 4 Trainings on farming techniques 52.6 77.6 5 Support to apply rice production farming techniques (1M5R, 3R3I, VietGAP,…) 47.4 40.3 6 Pest control 49.1 50.7 7 Guide on pest control when it happened 56.7 8 Transport products to storage 9 Preservation and storage 10 Support in case of lost by disaster, disease on rice 15.8 47.8 11 Others 3.5

Benefit of linkage to households Benefits Total Ca Mau Bac Lieu Soc Trang An Giang Stable consumption for product 84.9 66.7 87.5 92 76.5 Able to sell higher price 41.5 33.3 50 40 41.2 High profit 34.0 62.5 20 Supported fertilizer, seeds, plant protection products. 28.3 23.5 Received trainings 52.8 68 35.3 Advance from buyers without interest 32.1 48 5.9 Can buy good materials with good price 49.1 75 52 29.4

Benefit of linkage to AC, FG  Benifits Total Ca Mau Bac Lieu Soc Trang An Giang Have more income from linkage 26.6 27.3 42.1 17.6 32.1 Have more income from comission 20.1 10.3 23.2 Able to extend activities of AC/FG. 12.3 9.1 15.8 19.1 3.6 Enhance roles of AC/FG to its members 48.7 63.6 68.4 54.4 Strengthen capacity of AC/FG 43.5 63.2 38.2 39.3 Others 2.6 4.4 1.8

Difficulties when conducting linkage Total Ca Mau Bac Lieu Soc Trang An Giang Complicated farming process 9.7 0.0 5.3 11.8 10.7 Farmers not follow terms in contracts 18.8 18.2 15.8 14.7 25.0 Companies buy products with same price to market 29.9 26.3 27.9 35.7 Did not receive any support 16.2 36.4 10.3 16.1 Other 7.1 9.1 10.5 5.9

Reasons not to conduct LSRF % AC  % FG Members are not willing because it is complicated and not able to get agreement 31.1 21.4 Paddy fields of members are not side by side to each other 55.6 17.9 Don’t know how to develop LSRF 15.6 53.6 Don’t have company to buy product of the whole AC or FG 37.8 46.4 Don’t receive support from government 20.0 30.4 Don’t understand about benefit of LSRF 11.1 37.5 Others 14.3

Needs of support to develop LSRF Content AC FG Find companies to buy product of AC or FG 62.5 64.2 Trainings for members on farming process 58.3 Strengthen management capacity for AC/FG’s management board 43.8 69.8 Access to credit and loan 50.9 Support contract negotiation with companies 41.7 60.4 Support good quality seeds 37.5 41.5 Advance good quality seeds 35.4 47.2 Support to monitor and follow up farming process 31.3 32.1 Support to control disease when it happened 29.2 Support equipments for production 39.6 Support on irrigation 1.9 Adance fertilizer and materials 25.0 43.4 Support AC to apply sustainable farming process 22.9 30.2 Support fertilizer and materials 20.8 24.5 Planning of LSRF 18.8 35.8 Support on transportation 10.4 5.7

Reasons not to conduct linkage % AC % FG Can’t find company to cooperate 77.4 79.6 Area of LSRF is small, thus companies don’t want to contract 12.9 14.3 Companies don’t buy higher price than market 25.8 Quality of product doesn’t meet requirements from companies 6.1 Don’t have transportation 9.7 16.3 Requests of companies are too complicated and difficult 16.1 22.4 Others 10.2

Needs of support for linkage Content Total Ca Mau Bac Lieu Soc Trang An Giang Find companies to buy product 85.3 88.0 95.2 100.0 53.8 Support production following LSRF 58.8 56.0 76.2 55.6 38.5 Strengthen capacity of AC, FG 63.2 48.0 90.5 66.7 46.2 Others 5.9 4.0 4.8 0.0 15.4

CAPACITY OF AC/FG

Small scale AC FG 77 members/AC 83% AC have less than 120 members Area of farming every year of members: 160ha 31 members/FG 93% FG have less than 70 members Area of farming every year of members: 63 ha Difficult to organize activities for whole Contribution from members is not enough for activities of AC

Capacity of management staffs Mostly have education at secondary or high school - AC: 84% Chairmen are from high school or lower; 89% accountant are at secondary or high school level - FG: 54% leaders are from elementary or secondary level; 42% are at high school level Are old and work based on their own experience Trained – but less trained on administration skills, financial administration, branding

Low capital; AC doesn’t have chartered capital Province Register charter capital (million VND) Percentage of actual AC contributed to chartered capital Actual charter capital (million VND) Percentage of actual charter capital on registered (%) CaMau 303.9 22.2 32.2 32.5 BacLieu 151 77.8 64.4 60.8 SocTrang 173.4 62.1 55.4 67.7 AnGiang 741.9 96.7 781.7 101.8 Total 407.5 72.7 336.7 83.3 Indicator Ca Mau Bac Lieu Soc Trang An Giang General Total contribution from members 6.3 137.2 35.1 128.4 75.4 Recent capital of FG 18.3 311.0 17.5 143.4 120.5

Low capital; AC doesn’t have charter capital   Ca Mau Bac Lieu Soc Trang An Giang Total Registered chartered capital (million VND) 303.9 151 173.4 741.9 407.5 Percentage of acutal AC having chartered capital 22.2 77.8 62.1 96.7 72.7 Actual charter capital (million VND) 32.2 64.4 55.4 781.7 336.7 Percentage of actual charter capital on registered (%) 32.5 60.8 67.7 101.8 83.3 Indicator Ca Mau Bac Lieu Soc Trang An Giang General Total contribution from members 6.3 137.2 35.1 128.4 75.4 Recent capital of AC 18.3 311.0 17.5 143.4 120.5

AC lack of assets and equipments Type of assets and equipments Ca Mau Bac Lieu Soc Trang An Giang Total Sowing machine 20.0 10.0 Agrimotor 6.7 16.7 Pumping for irrigation 40.0 90.0 46.3 Sprayer Harvester 3.3 7.5 Boat to transport rice 3.8 Storage 13.3 13.8 Dryer Millers 0.0 Irrigation system 60.0 25.0 Other equipments Factories and others 1.3 Averagely, 1 FG has 800 million VND valued of assets

Very less FG has assets and equipments Indicators General Ca Mau Bac Lieu Soc Trang An Giang Pumping machine 21.6 0.0 60.0 12.0 16.0 Irrigation systems 14.7 36.0 20.0 4.0 Sowing machine 8.8 24.0 Sprayer 6.9 Land for office (which FG has certification for landuse) 2.0 8.0 Office equipments (computers, printer, chairs, tables,…) Agrimotor 1.0 Harvester Other land of FG Averagely, 1 FG has 70 million valued of assets

Management lack of transparency Lack of management regulation for AC Less AC prepares tax and financial reports Less internal audit, no audit from outside

Very less tax and financial reports; no audit   Ca Mau Bac Lieu Soc Trang An Giang Total AC provided certification of capital contribution to members 10.0 40.0 36.7 86.7 52.5 AC prepared financial reports to share with members in Management Board and Control Board 30.0 90.0 70.0 75.0 Annually, AC prepared tax report 20.0 0.0 3.3 80.0 33.8 Annually, AC conducted internal audit 48.8 In 3 recent years, AC had audit by government 46.7 17.5

Activities of AC Activities General Ca Mau Bac Lieu Soc Trang An Giang Irrigation 51.9 10.0 80.0 17.2 90.0 Sign contract with companies 46.8 50.0 30.0 58.6 40.0 Provide seeds or plants 40.5 60.0 44.8 33.3 Provide fertilizers 34.5 Provide chemical plant protection products 29.1 24.1 Service of soil preparation 22.8 20.0 20.7 Service of internal credit 20.3 0.0 Service of harvesting 19.0 13.3 Plant protection service 10.1 13.8 6.7 Monitoring on farming process 8.9 Sowing 7.6 6.9 Transport of agri-products Buy products directly from its members 3.4 3.3 Dry products 3.8 10.3 Preservation and storage Lifting service 2.5

Providing service is the main income for AC   Ca Mau Bac Lieu Soc Trang An Giang Total Percentage of AC’s members use its service 53.9 94.0 62.7 65.7 65.9 Percentage of AC’s members sell their products to AC 38.8 59.8 50.7 38.5 45.1 Percentage of average income of AC from its members 28.0 75.5 29.9 46.6 41.7

AC faces difficulty to access capital   Total Ca Mau Bac Lieu Soc Trang An Giang Percentage of AC faces difficulties 71.2 88.9 83.3 65.2 67.9 Reasons of difficulties (% AC) AC doesn’t have assets for mortage 73.4 66.7 55.6 76.2 95.2 Project proposal of AC is not accepted 12.7 0.0 22.2 14.3 AC doesn’t have production plan 11.9 11.1 Non-transparency financial documents 4.0 4.8 AC with poor performance 7.9 9.5 AC with lots of debts Others 23.8

Activities proposed by AC, but unable to do Soil preparation service 21.4 Providing fertilizer 17.7 Providing chemical plant protection products 13.6 Contracts with companies and AC 10.5 Providing plants 10.3 Irrigation 10.2 Harvesting service 6.7 Sowing 5.3 Buy products from AC’s members 4.1 Preservation, storage 4.0 Internal credit 3.6 Plant Protection service 2.8 Lifting service Providing livestocks 2.4 Others 7.9

Reasons Reasons General Lack of capital 91.4 Lack of capable staffs 31.0 AC are not trained to provide services 20.7 Others 19.0

Who AC can ask, when needed Personel Total Ca Mau Bac Lieu Soc Trang An Giang Ask commune staffs 46.8 50.0 65.5 26.7 Ask district staffs who manage AC 55.7 20.0 90.0 41.4 70.0 Ask provincial staffs who manage AC 49.4 40.0 31.0 Ask extension staffs 13.9 10.0 0.0 20.7 13.3 Ask other sources 2.5 3.3 No aksing 6.9

Difficulties of AC Weakness, difficulties % AC AC lack of capital 92.9 Weak capacity of AC’s staffs 74.3 AC faces difficulties in accessing to loan 70.0 AC faces difficulties to evocate capital 60.0 AC doesn’t know about government’s policies 54.3 AC has very less service to meet their members’ and outsider’s demand. 52.9 Did not receive good support from government 34.3 AC doesn’t have clear production plan 25.7 Members are not invited to participate in managing and developing production plan of AC

Needs of support Content % AC Support AC to access to loan 83.5 Trainings for AC’s staffs 68.4 Product consumption 67.1 Support AC in linkage and developing LSRF 57.0 Guide AC on government’s regulation and policies 48.1 Support AC to re-register as per AC’s Law in 2012 19.0 Support farming process and get certification 10.1 Support on branding Support to rent land for production 5.1 Others 8.9

Needs of training on AC administration Content General Ca Mau Bac Lieu Soc Trang An Giang Developing production plan 74.7 70.0 90.0 82.8 63.3 Managing and coordinating production plan 77.2 80.0 86.2 Monitoring and checking activities of AC How to encourage participation, fund contribution from its members to AC 50.6 48.3 33.3

Need of training on financial administration Content General Ca Mau Bac Lieu Soc Trang An Giang How to prepare financial and tax report 70.9 90.0 100.0 69.0 56.7 Using accounting soflware 55.7 70.0 80.0 34.5 63.3 Documentation and note taking 68.4 72.4 46.7

Need of PR’s skill Content General Ca Mau Bac Lieu Soc Trang An Giang Branding 21.5 20.0 10.0 27.6 Market analysis and evaluation 35.4 60.0 30.0 37.9 26.7 Product advertisement 26.6 41.4 16.7 Contract negotiation 68.4 50.0 79.3 66.7

Income mainly from outside Indicator Total Ca Mau Bac Lieu Soc Trang An Giang Percentage of members of FG using input from FG 35.8 40.0 62.2 30.4 10.2 Percentage of members of FG sell their products to FG 32.2 10.0 15.0 34.4 71.2 Average percentage of income of FG from its members 29.2 7.0 55.2 25.8

NEED OF IMPROVEMENT AND SHORT COMINGS IN LINKAGE AND DEVELOPMENT OF AC, FG

Not enough policies to encourage companies to join linkage Companies play key role in linkage Existing policies are not motivative for companies Land: authorities has lack of land for rent Favorable for export: need condition for exporting Support to improve field, trainings: brings more benefits to farmers Difficult to access to loan No favorable income tax for companies, … Mechanism of asking – giving

Very less capable companies for linkage Companies have to give investment or advance to farmers Invest to drying and preservation system Expenses to support linkage Pay fee to support AC and FG conduct linkage Buy rice with higher price Look for market for rice linkage

Capacity of AC/FG is weak Capacity of manager is weak Very less assets or capital Very less service Weak and non-transparency administration Small scale

Other shortcomings in linkage Lack of human resource Lack of regulation for contract violation Lack of support for AC Complicated procedures to get support

Shortcoming in AC development Still a high percentage of weak AC and nominal existence AC Actitivies from AC did not satisfy needs of its members Limited capacity of AC Insufficient awareness about characteristics and roles of AC (staffs and members in AC) Unclear and impossible supports and policies to AC Public service did not support well to AC (audit, tax check, lack of regulation to support AC) AC model is not appropriate

SOME GOOD PRACTICES ON LINKAGE AND AC

Model: Company – household Loc Troi Group Sign contract with households with large fields; Responsibilities of Loc Troi: Provide: seeds, fertilizer and plant protection products in advance Provide guidance and monitoring on farming process Buy rice at Loc Troi’s storage, with support on transport to farmers Buy rice as market’s price It is not LSRF, but rice in same quality Company has lots of staffs and capital; Difficult to extend

Model: company buy products and support AC (Loc Troi) Loc Troi Group and Vinh Binh AC Staff of Loc Troi is a member of AC; contribute capital and assign staff to participate in AC Management Board; Responsibilities of Loc Troi: Provide: seeds, fertilizer and plant protection products in advance Provide guidance and monitoring on farming process Buy rice at Loc Troi’s storage, with support on transport to farmers Buy rice as market’s price Responsibilities of AC: receive and distribute materials to its members; provide guidance and monitoring farming process in their AC It is not LSRF because AC’s members are in different villages Good point: organization of AC

Model: linkage between company/agency and AC/FG on materials Linkage with AC, FG and household Responsibilities of company: Advance: seeds, fertilizer and plant protection products Buy rice at their storage with same price as market Sell their rice to rice trading company Responsibilities of AC, FG; Receive materials and then distribute it to their members Organize production to its members as agreed process Small scale LSRF from 300-500 ha due to capacity of company

Model: AC organizes production as LSRF, buy products from their members and sell it to companies AC Dac Luc, Ho Dac Kien, Chau Thanh district, Soc Trang AC organizes LSRF for its members Buy rice from its members and sell to companies Very less AC can do this due to limited capacity, but this is a good model

SOME RECOMMENDATIONS TO PROMOTE LINKAGE AND DEVELOPMENT OF AC/FG

Approaches to develop AC, FG and linkage Prioritize to develop high quality rice production in large scale or small scale special rice varieties with branding Select to develop AC or FG as per their capacity and activities Take linkage and consumption as a criteria to promote development of AC/FG Support AC to sucessfully conduct their development plan

Material Company/agency AC MODEL Functions of AC: service to its members Objective: good service, ontime and reasonable price FG service Household Agriculture FG Problems: -Dividing functions of AC, FG - Financial mechanism, profit’s division between partners FG SX Material Company/agency Company

Solutions to promote linkage in LSRF Separate favorable policy for LSRF with policy on linkage; Planning on high quality rice production to focus on support LSRF and linkage Support LSRF: with high quality rice varieties, special rice, applying same and sustainable farming process; support through AC and FG Have project on promoting linkage in large scale: PPP Support to develop AC, FG National policy for enterprises? (land, tax, credit, export conditions)???

Solutions to develop AC Awareness raising for local authorities, AC’s managers and its members; Trainings to government’s staffs about AC (provincial, district and commune); Promote roles of public service: audit, tax check, regulation on responsibilities of commune staffs to AC Direct support to AC Only support AC that has clear development strategy; commit transparent administration Trainings to AC’s managers on administration skills, AC administration, financial administration; develop action plan, production plan, marketing, branding Provide theory + practice Assign staffs to support AC administration and management in short time Support AC to apply sustainable farming process and branding

Solutions to develop FG Strengthen capacity of FG’s managers, especially group leader on following skills: production plan, project development, regulation of management; financial management. Support FG to promote to AC. Provide guidance to combine FG to AC. Assign staffs to support FG since beginning to ensure that they are well operated and have appropriate strategy when turning to AC. Support FG to conduct same and sustainable farming process, branding

THANK YOU!