Overview
Ninety percent of the poor in Vietnam, or three quarters of the population, live in the rural areas which is why rural development and agriculture are critical to Vietnam’s development.
Agriculture accounts for 22 percent of GDP, 30 percent of exports and 60 percent of employment. The majority of the rural population makes its living by growing and selling crops (rice accounts for 45 percent of agricultural production), raising and selling livestock and fish, and from forest products.
Because the poorest populations are dependent on the land and water for their livelihood, it is critical that these natural resources are maintained, that the people are able to grow a variety of crops, so that they are not dependent on a single crop in case of crop failure or lack of market demand, and able to access markets to sell their products.
The World Bank’s rural development and agriculture activities in Vietnam have focused on ensuring (a) agricultural productivity growth and diversification; (b) improved access of farmers to markets and market information; and (c) natural resource management, to ensure that these can support people’s livelihoods.
Progress
Since 2000, there has been strong progress in the agricultural sector (which includes crops, livestock, forestry, aquaculture and fisheries) – overall agricultural growth has averaged 4 percent a year. This is partly due to policy reforms including ongoing impacts of allocating land use rights to individuals, and the result of market-based incentives such as higher prices for crops.
Also during this period, Vietnam has moved well beyond earlier experiences of chronic food shortages to being the world’s second largest rice exporter.
Major improvements have been made in rural development as well. The number of communes still lacking rural transport access to district centers was reduced by more than half, from over 600 in 1999 to 269 most recently, or under 3 percent of communes.
Rural access (proportion of people connected by an all weather road) improved from 73 percent in 1998 to over 76 percent according to recent data, or an additional 2.5 million people. For rural electrification, access has similarly increased from around 63 percent to over 81 percent at the household level. For rural water supply and sanitation, annual growth rates in access to improved water sources over the recent decade reached an impressive 7.1 percent overall.
Although progress has been made, significant challenges still remain:
Stagnant agricultural productivity.
Slow rate of investment in agricultural diversification. Rice continues to dominate, accounting for 45 percent of agricultural production and 60 percent of cultivated land. Industrial crops (e.g. coffee, rubber, cashew, sugar cane and pepper) account for only 20 percent of production.
Underdeveloped marketing channels, institutions and infrastructure. For example, farmers may not receive timely information on crop prices which affects their ability to sell products if the price is too high, or the lack of roads prevents them from transporting their crops to market in time and transaction costs increase.
A widening gap between urban and rural areas and ethnic populations in particular. Economic growth has not benefited all populations equally, with poverty increasingly concentrated among ethnic groups and the more remote northern uplands populations.
Unsustainable and inequitable patterns of natural resource use, access and control. In the forestry sector, for example, unmanaged logging leads to problems of erosion, flooding and loss of biodiversity. Water scarcity becomes a problem for both consumption and crop irrigation.
Vulnerability to natural hazards. Flooding and storm surges in low-lying areas cause crop failure and livestock disease leading to loss of income and food insecurity.
Limited capacity of public institutions and misalignment of public expenditure serving rural sector interests. The budget for agriculture and rural development has been de-centralized from the central to the sub-national governments which are still in the process of increasing their capacity to manage rural development projects.
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