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

2. 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

3. OBJECTIVES AND METHODS

4. 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

5. 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

6. ENCOURAGING POLICIES

7. 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

8. 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

9. 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

10. CURRENT LINKAGE

11. 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

13. 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

14. 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

15. % 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. CAPACITY OF AC/FG

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. 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

41. 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

42. 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

43. 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

44. 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

45. 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

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

47. 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

48. 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

49. 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

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

51. 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

52. SOME GOOD PRACTICES ON LINKAGE AND AC

53. 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

54. 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

55. 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 ha due to capacity of company

56. 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

57. SOME RECOMMENDATIONS TO PROMOTE LINKAGE AND DEVELOPMENT OF AC/FG

58. 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

59. 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

60. 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)???

61. 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

62. 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

63. THANK YOU!