CC BY
19
Luu Th.B. ©
M.Sc. University of Sciences - Thai Nguyen University
ENHANCEMENT OF PARTICIPATING CAPACITY OF VIET NAM VEGETABLE INDUSTRY IN THE GLOBAL VALUE CHAIN
Abstract
With current globalization context, a country just involves well a stage of the vegetable product chain in the global market, instead of entire implement of the value chain of the global vegetable products. The determination of the participating capacity in any stage of the value chain depends on the ability to meet criteria of each stage in the value chain and competitive capacity of the factors involving in the chain. In general, the participation of developing countries in the global vegetable value chain at stages of the chain at markets, that the vegetable industry of these countries want to reach, is not easy due to the developed countries holding stages bringing high added values or high profits of the chain. The vegetable industry of Viet Nam wants to join deeper and larger into the global value chain, it has to be available long-term development strategies, a good investment strategy to be able to participate in global value chains and constantly enhance the competitive capacity of the vegetable products in context of the international economic integration.
Keywords: Participating capacity, the global value chain, the added value, market.
I. BACKGROUND
In essence, integration into the world economy is to engage in global trading system, to enter the global business network, and to participate in global value chains. Today, the status of a country, the country's industry is reflected in level of participation in processes of that global value chain and sectors of countries are looking to improve, strengthen competitive capacity to participate more in global value chains and participate in processes creating more added value or the most profit in the global value chain.
Vegetable industry of Vietnam is the sector with a competitive advantage from favorable natural conditions and low labor costs. However, these advantages reduce more and more in current global competitive conditions. The studies on impacts of international economic integration for Vietnam's vegetable industry as well as impacts of implementation of WTO commitments shows the vegetable industry is one of the industry under great competitive pressure, because Viet Nam vegetable industry has just participated in processes creating low added value . In this context, the research on strengthening participative capacity of Vietnam vegetable industry into global value chain is necessary.
II. CONTENTS AND RESEARCH METHOD
Scope of analysis: It is based on basic reasoning of the value chain, the supply chain, the global value chain, the factors participating in the global vegetable value chain; synthesis and analysis of factors affecting the value chain of the global vegetable industry, the situation of Vietnam's participation in global vegetable value chain in recent years. Learned lessons inside and outside of Viet Nam are reviewed to propose solutions for increasing participation of Viet Nam vegetable industry in the global vegetable value chain. The author has used the theory of "value chain" by the scholar of Michael Porter. The scholar used the concept of value chain to analyze factors affecting the development of an industry, business, value-added structure etc. from which to approach research of participating capacity of Vietnam vegetable industry in the global vegetable value chain.
© Luu Th.B., 2012 г.
Method of Approach: (i) The global approach method to study the global vegetable value chain, (ii) Access to the system factors of impact and affection to the global vegetable value chains. Method gathering documents and data: Using survey method of samples a, interviews etc. It inherits results of research literatures available inside and outside of Viet Nam via annual reports of ministries and sectors concerned. Documents are published by books, newspapers, magazines, statistical yearbooks. Method of data processing: Data were statistically processed by Excel program.
III. OUTCOMES AND DISCUSSION
1. Concept of value chain of the global vegetable industry.
The global vegetable industry value chain is a line of production - processing - business of vegetables by a globalizing mode of globalization, of which, economic subjects of many countries involved in different stages from research and development, design, production, distribution and marketing. The value chain of the global vegetable industry is a system of activities on production - business of vegetables in order to provide values to customers, to meet needs of vegetable consumers in the world. The pattern of the value chain of the global vegetable enables stages in the line of production - business of the chain located in different countries that can achieve the highest economic efficiency with the lowest cost. The vegetable industries of contries in the world tends to participate more deeply and larger in the global vegetable value chain, try to increase profitability of vegetable products by involving in stadges available high values and to find out enhancement of Viet Nam vegetable industry in the global vegetable value chain.
Vegetable commodities available quantity of stages in the value chain is shorter than industrial goods and is different in some added values. It is from stages of research of vegetable seeds and development of successful pilot productions able to cultivate, then vegetable processing, marketing and distribution of vegetable stage to end consumers. The author has to establish the pattern of the added value chain of the global vegetable industry. The pattern shows that the value added is generated mostly in stages of research, development and marketing. The added value of stages of design and distribution is lower. The lowest added value is the stage of vegetable production (Figure 1). This pattern partially explains why global enterprises of production - business of vegetables have tend to focus more on activities of research, development and marketing, then followed by the stages of design and distribution. Factually, vegetable industry of developed countries often focuses on research of vegetable seeds, technology and production processes and then transferred vegetable production to developed countries and developing countries.
Figure 1: Pattern of the added value chain of the global vegetable
■ I'm T
Each vegetable product produced also has a value including the value chain with many values created by connections. During the era of international economic integration, the chain to create the final value of a vegetable production is beyond borders of a nation - territory, or a vegetable product produced in a specific local but it also bears the global value. In the process of creation of the global value has three main stages: research and development - intellectual property, vegetable production, establishment of trademark and business. The stage of research and development of vegetable industry, establishment of trademark, and consumption of vegetables are chains that bring the largest profits and surplus and are hold by developed countries. The global added value flows into lower places. It means that this value flows from poor countries to rich countries. There is not the reverse flow. If the developing countries likely Vietnam did not choose goal that is to overcome and compete in two stages generating high added values, the distance between Vietnam vegetable industry and developed countries increase gradually high.
2. Reasoning of participating capacity of the vegetable industry involved in the global vegetable value chain.
2.1. Concept of participating capacity of vegetable industry in the global value chain
The capacity of the sector involved in vegetable global value chain is integrated core elements of the vegetable industry and ability able to maintain and develop its position in the global value chain. Ability to participate in the vegetable industry in the global value chain primarily is that the commodity sector must meet requirements of global buyers, occupy a certain market share in the global market. Elements create core values of vegetable products accepted by the market and be able to maintain and develop higher steps of ladder within the value-added chain.
If it accesses to components of the participating capacity of the vegetable industry of the global value chain, the participating capacity of the vegetable industry in the global value chain includes as follows. Firstly, elements of vegetable product are factors of vegetable production such as geography, nature, productivity and quality of vegetable products, amount of vegetable products able to supply for the market, distinctive differences of vegetable products, packaging and labels of vegetable products etc. These elements constitute the competitive capacity of vegetable products. Secondly, elements involve in the global value chain such as vegetable producers, vegetable collectors, vegetable processing plants, exporters of vegetables and vegetable retail distributors. The capacity of agents involved in the vegetable industry is mainly competitive capacity of enterprises of production, processing and business of vegetables. Those are capability of existence, maintenance or increase of profitability, participating capacity in stages available high added value in the global value chain, ability to dominate the international vegetable market. Thirdly, those are elements on governments and policies. These elements expresse through the role of governments in negotiating for opening market and signing free trade agreements, constructing infrastructures of the vegetable industry, developing science and technology and training of human resources, having policies of support and investment for vegetable development etc.
2.2. Develop a system of criteria to determine the participating capacity of economic agents in the value chain of the global vegetable industry
Criteria for determining the participating ability of agents are vegetable producers in the value chain of vegetable industry. They are as follows scope of vegetable production and ability to provide vegetable products with amount under demands market; diversity of vegetable products under crops; the ability to meet quality vegetable product at requirements of consumer markets; the added products produced; ability of accessibility of consume agents of vegetable products in the value chain.
Criteria for determining participating ability of agents are collectors in the value chain of the global vegetable industry. They are as follows ability of access to producers and purchasing
methods of vegetable products; quantity, quality and types of vegetable products, capacity to preserve vegetable products after collection; ability to maintain vegetable products after purchasing; ability to access and methods associated with consumers or distribution of vegetable products.
Criteria for determining the participating ability of agents are vegetable processing persons in the value chain of the global vegetable industry. They are as follows the organized ability of material resource for vegetable processing operations; investment capital in processing vegetables; facilities and equipments of technical materials and vegetable processing technology; labor force engaging in processing operations and management capacity on technique and business management; the ability of creation of new vegetable products; the ability to meet quality standards of the market for vegetable products; and the access ability and methods associated with the global vegetable distributors.
Criteria for determining the participating ability of agents are vegetable exporters in the value chain of the global vegetable industry. They are as follows amount and turnover of exported vegetable products; structure and added value of exported vegetable commodities; the ability opening exported market of vegetable products; number and size of businesses involved in exporting vegetables; organized methods of exports commodity resource and participating capability in the distribution chain and the global vegetables retail.
2.3. The constituent elements of competitive advantages in global value chains of the vegetable industry
In order to international customers known more or less about vegetable products of any country, it needs to promote image of vegetable products through the credible mass media, e-commerce development, formation of transaction places of e-goods or electronic goods auction center. Vegetable products have to ensure Global GAP standards or Euro GAP, control closely process from cultivation, processing, packaging and transport. Vegetable products must meet criteria for participation in global value chain such as competitive price, guarantee quality, delivery commodities in time and enough time to further distribution when comparing with expire date of use, a large enough volume of commodities - packaged under the brand of manufacturers or purchasers, trademarks of producers, and trademarks of producers and origin of vegetable products to ensure requirements of exported access and convenient payment conditions.
To participate in the global value chain, vegetable products and businesses in each country has to create and maintain competitive advantages. Competitive advantages should be strengthened and developed, if not advantages could be lost. Premises of the Government’s policy impact on the competitive advantage of the vegetable industry are government’s policy created for enterprises of production and business of competitive vegetable and gain competitive advantages. The motivation provides the competitive advantage rather than that of the short-term cost. The competitive advantage in a country's vegetable industry is created within a decade or more. It is not through business cycles. Nations gain advantages due to distinction of differences and do not thanks to the similarity. No nation can create and maintain competitive advantages in all sectors and vegetable products. Therefore, it is necessary to be priority to develop and vegetable products available competitive advantages and to develop other sector under the spreading rule.
2.4. The component elements of the participating capacity of the vegetable commodity industry, involving in the global value chain.
There are many component elements of the participating capacity of the vegetable commodity industry in the global value chain, including all the elements inside and outside of the chain. Parties involving in the chain are vegetable business producers including vegetable growers, vegetable processors, distributors of vegetable products, companies advertising
vegetable products; the organizers providing services such as store management and quality control of vegetable products. Elements outside of the chain are systems of international and domestic laws, government’s policies, market goods and services market, commercial infrastructures, finance, investment, land technological development, development of human resource, insurance and pension. Measures of government’s support are trade promotion, information provision, forecast, building of infrastructures, etc. Those are very important to the vegetable commodity industry participating in global value chain.
There are four key factors constituted the participating capacity of the vegetable industry in the global value chain: Firstly, the institutional environment includes the legal system, policies of government, capacity of management structure, mechanisms and rules of the system operation. Secondly, the capacity of agents participating in the global value chain expresses the ability to flexibly adjustment on input elements (seed, land, labor, finance etc), output elements (types of vegetable products, services etc) as well as business administration (pattern of management organization etc.). It meets the needs of world markets, the role of large buying groups and their regulations on quality, delivery conditions, variety of products etc. It requires with some links of chains of the value chain, including seeds, fertilizers and pesticide of plant protection, packaging requirements etc. It is the ability to meet international and national standards in the food industry, including standards on food safety, social standards and environmental standards. Thirdly, it is the scope of the vegetable industry and the level of support technological development. Fourthly, it is the level of acceptance of consumers with trademarks and global trademarks.
3. The current situation of participation of Viet Nam in the global vegetable value
chain
3.1. Position of Viet Nam on the international vegetable market
The vegetable industry of Viet Nam has great potentiality to achieve a good position in the world vegetable market. Viet Nam has the favorable climate and soil, 70% of the population employed in agriculture and about 1.5 million ha for cultivating vegetables. Therefore, Viet Nam has great potentiality to develop long-term stability in production and exporting vegetables with a variety of vegetable products, area, yield and quality of vegetables of our country has been improving and serving well for the domestic market and export. However, the current position of Viet Nam vegetable industry in the world market is very limited; vegetable production of Viet Nam is quite high when compared with other countries in the region, but annually vegetable production of Vietnam exported only little and there are in few processed vegetable products and high quality vegetables.
The export turnover of vegetable from 2004 up to the present has increasing stably. It is estimated overall for the period from 2004 to 2009, total export turnover had reached USD 1.82 billion. The growth increase in average is 20 % per year. Total export turnover in 2004, 2005, 2006, 2007, 2008, 2009 are USD 179 million, USD 235 million , USD 259 million , USD 306 million, USD 407 million and USD 439 million [5], consecutively. Vegetable exports to all major markets, including many previously difficult markets, such as America, Japan, France, Germany etc. have increased greatly. However, It compares with the potentiality. The vegetable industry of Vietnam exporting vegetable products is not much, the export turnover is still low, and not high economic efficiency in stages of the vegetable global value chain.
3.2. The vegetable chain of Viet Nam
The vegetable value chain of Vietnam includes major factors such as farmers, collectors, wholesalers, cooperatives, farms and producers and vegetable processing, associations, agencies of research and support of the vegetables industry. In general, the involvement of factors and factor groups of Viet Nam vegetable industry in the global vegetable value chain is at the low
level and limited. Business under pattern of the global value chains is still very new to most factors of the vegetable industry in Viet Nam. Involving in the vegetable value chain of our country today is mainly farming households, who do not have access to the world market. Majority of vegetable growers produces scatteredly with low vegetable yields, uneven quality, production based on experience and subjective estimation on market. Pattern of households of vegetable production has revealed weak points on associated strength. However, at the present, the state authorities have not yet issued effective policies to organize and link households of vegetable production with each other. Enterprises on production, processing and consumption of vegetables in Viet Nam are mainly small and medium enterprises. These enterprises lack of capacity of finance and competitiveness, ability associated with business and production cooperation, knowledge and experience in international business.
3.3. The participating capacity of Viet Nam vegetable industry in the global value
chain
According to data results of investigation and survey of the author on the participating capacity in stages of the vegetable value chain, the stage of research and development is focused mainly to assess at the low average with 33.58% at weak level and 26.59% at the average level. The stage of vegetable production is assessed above average with 35.87% at the average level and 39.64% at the relative good level. The stage of processing assessed is at the low average with 31.08% at the weak level and 28.39% at the average level; the stage of distribution is assessed at the weak average, with 23.97% at the weak level and 39.65% at the average level. The stage of services is assessed the weakest level with 35.08% at the lowest level and 31. 89 % at the average level
4. Some measures with purpose of promotion of participation in the global vegetable value chain.
Firstly, measures for the stages of production and processing of vegetables are as
follows
- Encouraging establishment of professional village of vegetable production, the vegetable-growing cooperative in order to exchange information on technique, market and be able to organize vegetable production for export under orders of partners with the aim to have enough quantity, quality and consistency of high vegetable products.
- It improves the capacity of vegetable seed production of centers of research and engineering applications and facilities of major-scale production. There must support capital investment from the State in scientific research, import, testing, selection and trial production of new vegetable varieties. It expands partnerships, investment of research and application of biotechnology in the field of breeding and vegetable cultivation techniques. It researches actively to choose vegetable breeding bearing distinction characteristics of each area of production, to create exclusive products with national nature. Therefore, vegetable export products have high competitiveness. The research centers on vegetable breeding collaborating with the agricultural extension system transfer advantages of technology to farmers growing vegetables. The state has plans for training and retraining for labor workforce of vegetable industry to become technicians, who have the ability to organize production and to acquire better information on technique and support of development of new vegetable varieties to produce high quality vegetables.
- It promotes applications of science and technology. It should be aware that research and application of production and storage of vegetables under the high-tech process are not only to bring high economic efficiency, improvement of lives of residents, but also to contribute to the transition of agriculture structure to direction of forming the vegetable commodity production in association with market and ensure of ability of consumption of vegetable products. In order to development of vegetables in the direction of high technology creating vegetable products with sufficient quantities, uniform in quality, it requires investment in suitably technique material facilities for ensuring both high technical requirements and economic efficiency such as plastic
roofs, irrigation systems, building houses of nursery seedlings with high quality standards.
- It promotes development of vegetable processing industry. The state supports network development of vegetable processing facilities in small and medium. Plan of vegetable processing plants should be held associated with areas of vegetable production of raw materials. There are policies to support development of area of raw vegetable production serving for vegetable processing, creating favorable conditions to attract developed investments of vegetable processing plants
Secondly, measures for developing of market and vegetable products.
- It is to establish and enhance the trade promotion. The limited management capacity of the vegetable supply chain of Vietnam leads to less competition. There are not competing brands as countries exporting vegetable to international markets. It is necessary to support finance to send business delegations with quality expertise to introduce Viet Nam vegetable products as well as research, study tours, experienced exchanges on production and consumption of vegetables from famous countries on cultivation and business of vegetables in the world and the region to strengthen cooperation and promote export of vegetable products.
- To meet the international standards, one of the most important conditions for the success of fresh vegetable export, according to experiences of countries with developed vegetable industry, is the quality preservation in the entire production line from taking care of vegetables, post harvest storage, distribution of blocks, stored in a warehouse, processing, package, label past to distribution
- It is to implement well the market research organization. Initially, the vegetable production industry in the next time needs to use in maximum market information inside and outside of Viet Nam from the vegetable industry associations, units carrying out trade promotion etc. Then, gathering and identification of potential market as well as mode of penetration accordingly. In the long run, it is necessary to organize a system of market professional research to established a foothold in the international market.
- It enhances the competitive capacity of the vegetable industry to enhance competitive ability of vegetable products of Vietnam, it should focus on both issues of cost and quality of vegetables, need to invest to improve quality of vegetables for market development for vegetable export. It diversifies vegetable products and increases the added value of vegetable products. It should create new vegetable products as well as more distinction differences of vegetable products.
- Iissues of certifications and establishment of trademark for vegetable products are supported. Programs to build trademark quality of exported vegetables under Global GAP standards. There should have many places in nationwide production of fresh vegetables, organic vegetables, and safe vegetables under safety standards of advanced scientific and global standards.
Thirdly, measures to upgrade and manage the chain.
- It organizes and facilitates strengthening of the vertical links and increase of coherence in the global vegetable value chain. It ensures interests of participating factors in the vegetable value chain and strength the link among vegetable households - vegetable processing plant -vegetable exporters.
- It establishes industry associations within the vegetables industry. In order to production of vegetable with large scale, associations assist or give advices on growing of vegetable for households in term of socio-economics, training of extension agriculture, access to agricultural services industry; associations also help on reorganizing the vegetable industry, marketing, packaging, registration labels and products, etc. It organizes and implements management of the vegetable industry through managing the entire value chain.
Fourthly, improving the business environment of the value chain.
- It establishes patterns of vegetable productions linking among the State, society,
scientists and farmers to meet the organized capacity under requirements of the export market. Organizations in special on consuming products such as vegetable trading centers are established as soon as possible. Besides, functions to promote consumption of vegetable products, these centers are also a place to exchange of information between markets and manufacturers, from which the adjustment in determining types of vegetables, cultivation area, consumption of products etc.
- It supports to access to market. The Government should strengthen activities of signed implementation of agreements on botanic quarantine, bilateral agreements on quality control and bio-safety with other countries to support the vegetable export to be favorable
- It promotes the role of the Vegetable Association. The Vegetable Association is as a bridge between producers and traders as well as a bridge among producers and entrepreneurs together. The Association's role is to implement training on the agricultural extension and vegetable cultivation techniques, to create a labor workforce with proficient skills contributing to help farmers accessing to advantaged science and technique, new breeds from foreign countries and provinces. It makes enriched vegetable items and categories.
IV. CONCLUSION
Countries in the world, in the trend of globalization and trade liberalization, are taking advantage of opportunities to improve their competitive capacity, participation in the global value chain, to promote advantages to participate in stages creating the most value. A country can only participate in one or several stages of the global value chain and it is not necessarily to involve in all stages.
Viet Nam vegetable industry participates in the global vegetable market with very small proportion compared with many countries in the world. Therefore, Viet Nam needs to have policies and solutions for a long-term strategy to strengthen participating capacity of the vegetable industry, choice for vegetable industry with a participating mode with the most effectively in world markets, to upgrade gradually role of the vegetable industry in the global vegetable value chain. Viet Nam vegetable industry involves in the value chain of the global vegetable industry to help Vietnam to have further expanding market opportunities and to exploit comparative advantages, to acquire effectively transfer on capital, technology and business knowledge state - of - the - art and to engage in the stages of high added value in the global value chain.
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