Opening Address by Dr Andrew Speedy, FAO Representative in Viet Nam at the Vietnam Agricultural Outlook Conference


Time & Date: 24-25 March, 2009
Event: Viet Nam Agricultural Outlook Conference
Rex Hotel, 141 Nguyen Hue Str., Dist 1, Ho Chi Minh City
Speaker: Dr Andrew Speedy, FAO Representative in Viet Nam

Excellency Vice-Minister, Distinguished Guests, Ladies and Gentlemen,

This conference is one of the most important events that have taken place in recent years for the agricultural sector in Viet Nam. Along with many other countries, Viet Nam faces great uncertainty and enormous challenges in the light of the global financial crisis. This conference has the responsibility to analyze, consider and advise on the course of action or actions that should be taken to ensure continued growth, social equity and sustainability in the face of the problems.

Vietnamese agriculture has been a great success story over the last 30 years, rising from food deficit to leading exporter in several important commodities including rice, fish, seafood, coffee, cashews, pepper and rubber, as well as shoes, garments and wooden furniture.

Viet Nam has enjoyed rapid economic growth for most of the period since the launch of the Doi Moi reform process in 1986. Agrarian reform, decentralization of production and distribution of basic necessities, easier access to international markets and fiscal and monetary stabilization have stimulated productivity growth and rising living standards. Per capita income rose nearly five times, from $220 in 1994 to $1,024 in 2008. Viet Nam has achieved most of the Millennium Development Goals (MDGs). The country has halved its poverty rate and seen improvements in under-five mortality, primary school enrolment, child malnutrition, maternal mortality, and access to clean water and sanitation.

Private sector development, international trade, increased exports, and foreign direct investment have been the driving forces behind Viet Nam’s economic growth in the past decade. The Socio-Economic Development Plan (SEDP) 2006-2010 projected an annual average GDP growth of 7.5-8% for the period, backed by a 16% annual export turnover growth. At the end of last year, the Government was predicting 7% GDP growth and 18% export growth.

But it appears that global economic problems have become even worse and this will continue to have a serious impact on Viet Nam’s economy in the foreseeable future.

Various financial institutions have predicted slower growth of 6%, 5%, 3% and as low as 0.3% earlier this month by the Economist Intelligence Unit. I quote: “Real GDP growth is forecast to slow sharply in the early part of the forecast period as the weakness in global trade hits Vietnamese merchandise exports hard. Although foreign direct investment inflows will slow dramatically in 2009-10, Vietnam's long-term prospects remain sound.” This latter point remains the consensus.

From a socio-economic perspective, it is reassuring that: “Consumer price inflation surged in 2008 but will be significantly lower in 2009-13. Supply-side inflationary pressures (such as rising food and fuel prices) will ease. Disposable income per head is expected to fall in 2009, before picking up throughout the rest of the forecast period.”

The agricultural commodity position is indeed a two edged sword.

Commodity prices soared in 2008 and the World was particularly concerned about high food prices including rice, corn, wheat, soya and other basics; oil hit 150 USD a barrel and agricultural input costs rocketed as well.

I hardly need to tell this audience of the subsequent fall in all commodity prices with oil dropping to below 40 USD a barrel and food prices falling back to only slightly above 2007 levels. At the same time, other agricultural commodities have also fallen: coffee, rubber, sugar, pepper, etc., and many farmers (who rely on these cash crops and did not benefit much from the transient high food crop prices) are suffering even more.

At the end of last year, the United Nations Country Team produced an Issues Paper on food security and noted particularly that “The … reduction in the purchasing power of many Vietnamese households, especially poorer ones, presents a substantial risk that households that had risen above the poverty line will fall back below it, as well as an important challenge to ensuring food security in Vietnam and the appropriate level of nutritional intakes by the Vietnamese people.”

“… poorer women and children are particularly at risk since higher food prices can worsen their already precarious nutrition status. There is also a regional dimension to these concerns, with patterns of vulnerability often overlapping in certain regions which are characterized by high poverty rates, poor nutrition, and which are most affected by natural disasters and resulting crop failure. These regions have relatively high concentrations of ethnic minority populations.”

“In addition to the immediate nutritional impact posed by higher levels of food prices, the pressure for poor households to increase earnings also impacts on breastfeeding, child care, child labour, school attendance and out of pocket health expenditure.”

“Adding to these more immediate concerns …, it is important to note that Viet Nam is regularly afflicted by 6-7 natural disasters (typhoons and floods) annually, which destroy crops and food resources, as well as seeds, fertilizers and other resources in vulnerable areas. These climatic events, and their impact on food production in Vietnam, are likely to gain intensity with the advent of global warming and the specific threats that climate change poses for Vietnam’s rural economy in the mid to long term.”

In dealing with the key issues of maintaining growth, social equity and sustainability, the roller coaster of commodity prices is perhaps the most serious concern. Agricultural policy and planning is made all the more difficult by price volatility.

At the Meeting on Food Security held in conjunction with the ASEAN/AMAF/SOM meeting last October, my colleague Alexander Sarris noted that commodity price volatility has increased in last ten years. This he attributed to production variability and trends (has not increased); stocks (have declined); financial speculation (has increased); exchange rates (are more volatile); oil prices and biofuel production (increased demand and uncertainty); trade policies and price transmission (price transmission has been small in most economies). Overall he expected considerable future volatility.

This is why the work of this Conference is difficult but crucial.

We look forward to the presentations of national and international experts on the different agricultural commodities and the economy in general.

As we study the various predictions of FAO Outlook Team, the World Bank, ADB, the USDA, the EU, the Private Sector, the Harvard Kennedy School, the Economist and many others, it is hard to be confident in future trends (other than continuing volatility). With the likelihood of zero or negative global GDP growth, Vietnam is likely to join the economic slowdown particularly with regard to exports.

Given the current level of stocks and supply situation, I expect to hear that cereal prices (including rice) will continue to be moderate but remain above the previous long term level; I expect there to be continuing strong demand for livestock products in the medium term but that feed costs and competition from S America to be important factors; and I expect to hear that agricultural commodities will continue the long term downward trend with volatility being important.

The proposed policy of Agriculture Farmers and Rural Development (Tam Nông) is to be welcomed in this context as it aims to adopt a more holistic approach to rural development that does not rely so heavily on agricultural commodities but stresses alternative livelihoods and income as well as value added and processing.

We have a major task ahead over the next two days: to deliver policy advice for the success of Tam Nông while considering probable short term, medium term and long term future trends, trade policy (without protectionism), as well as the environment and sustainability.

The key words as I said are: continued growth, social equity and sustainability in the face of the problems.

I have great confidence in the capacity of IPSARD and this Conference to deliver.

I wish you good health, happiness and success in your endeavours.

Thank you.