Review and Evaluation of Agricultural Policies in Years 2015-2017

This journal article describes main results of the OECD Annual Report published in 2018, titled “Review and evaluation of agricultural policy in 2017” for 51 selected countries in the world, including Vietnam. The report is closely prepared by MARD and OECD experts. The journal article emphasizes more on Vietnam by updating and adjusting data, information and policies in 2017 and 2018. The description presents the changing trend of agricultural policies applied in the world, considering whether this trend is in the direction of achieving sustainable productivity growth, environmental protection, and adaptation to climate change. On average in the last 20 years, trend of world policies has been better but far to catch above purposes. The development of international trade has made the commodity movement more freely and price gaps narrowed between countries and regions. This trend made agricultural markets developed more toward reflecting the scarcity of good and services. Average level of total agricultural supports has been reducing. Consequently, the world price indices and the total support have been converted between countries and commodities. However, the total agricultural support reduction is mainly in developed countries like OECD countries. Emerging and developing countries have increased their agricultural supports. Relative to GDP, the level of the total agriculture support in Vietnam has been reducing.Inside the total agricultural support, producer supports accounted 78% while general service support accounted only for 14%. Inside the producer support, market price support accounted for more than 50% in many countries. Payments based on outputs and inputs also accounted more than 50% in many countries. In Vietnam, the producer support is very small, negative level in 2015 and 2016 and became positive in 2017 and 2018. The agricultural producer support in 2017 is about 900 million USD. In the overall service support, many countries mainly invest in infrastructure construction, for example in Japan and Vietnam over 70%, while investments in other items are too small, for example that in Vietnam is only about 16%.In conclusion, OECD suggests that market price support should be reduced and finally eliminated. Similarly, output and input payments should be reduced and eliminated. Future policies should focus on general support service that helps producers to achieve sustainable productivity growth in the context of a changing and uncertain climate. OECD especially emphasizes on appropriate investments in research, together with efforts to ensure that the outputs of this research reach farmers. OECD also emphasizes on research that help producers to better manage risks including business risk, weather risk, and climate changes. Agricultural production and climate changes are strongly interacted. Future research should be the better co-operation between public and private sectors with the leading role of public sector. The future research should be co-operated more strongly between countries and regions because of the differences in histories, cultures, geology and climate

Developing a model of live cattle and beef trade in South East Asia and China

This paper presents the specifications of a model to assess ex-ante how particular scenarios – for example changes in cattle slaughter and export policy in Myanmar, the Indonesian live cattle import quota, the ESCAS system; economic integration under the ASEAN Economic Community, or increased quarantine controls resulting from disease outbreaks – might affect cattle and beef prices and trade in the broader region. Incorporation of new information relating to the factors that drive complex flows of cattle and beef would assist policy-makers throughout the region to improve strategies for beef industry development

A Qualitative Review of Vietnam’s 2006–2010 Economic Plan and the Performance of the Agriculture Sector

Vietnam’s economy faced difficulties in the 2006–2010 period due to the global financial crisis. The average inflation rate (>20%) was higher than the expected level (<10%) for the period. The average GDP growth rate (6.3%) was lower than the target (7.5%). In the global context, however, Vietnam’s economic growth and inflation rate were still seen as successful due to the government’s strong policy and administration interventions. Nevertheless, similar to the outcomes of the country’s other economic plans since 1986, the key “relative targets” of the plan for 2006–2010 were not successfully achieved, including that for reduced income inequality, thus restraining Vietnam’s long-term growth. The main reason is that policies implemented to achieve these goals are not at “equilibrium” quantitative points. Therefore, more investment in research that applies large-scale mathematical economics models is urgently needed, similar to the ones used widely by many other governments in the world. In addition, the government’s role in managing and developing domestic markets should be improved to protect farmers who always sell their products at prices lower than the shadow prices

A Spatial Equilibrium Analysis of Policies to Promote the Wood-Processing Industry in Northern Vietnam

The Government of Vietnam (GoV) has planned increased self-sufficiency in terms of the domestic production of wood and wood-processing products. For example, by 2010 the forestry industry could supply approximately enough raw materials for the wood-processing industry, including 100% of raw materials for prop, ship, pulp, paper and engineered-wood products, and 85% of raw materials for domestic furniture production. The domestic production of paper and furniture products with the planned quantities of 1.5 and 2.4 Mt respectively would not only meet the domestic demand but also have an export by 2010. In order to achieve the plan, the GoV has sought to increase the area of planted production forest by the implementation of the Five Million Hectares Program and expand the production capacity of the domestic wood-processing industry. For example, in 1998, 19 new paper factories and 20 engineered-wood enterprises were planned to be built in the whole country during the 2000-10 period. Of these, nine paper enterprises and five engineered-wood enterprises were in northern Vietnam. Similar to many countries, main national objectives were not achieved in Vietnam by 2010. Factors impeding the achievement include distances between the new factories, declining import taxes, low design production capacities of the new factories and high average production costs. This thesis seeks to address these problems by developing a spatial equilibrium model (SEM) and applying this model to analyse policies and explain why the gap between objectives and outcomes has existed, and to draw policy implications on how to increase the probability of achieving planned objectives. The statistical data published about wood and wood-processing products published in Vietnam have not been sufficient to populate the SEM. As a result, a research group including the candidate and his colleagues working at the Statistics and Informatics Centre for Agriculture and Rural Development (ICARD) developed new concepts of wood-processing sub-industry, factory and enterprise and new conversion rates between outputs and inputs, and new conversion rates between measurement units of bundle, stere, m3 and tonne. These new concepts and conversion rates were used to re-classify data published in 2008 to make these data understandable and applicable to the SEM. In addition, the research group also collected external price elasticities to use as proxies to domestic price elasticities. In the literature review, the thesis demonstrates that the SEM with linear supply and demand functions and linear constraints can be solved by linear programming, non-linear programming and mixed complementary programming. Because of its simplicity, linear programming has been used to solve the thesis’ SEM. This SEM is used to evaluate the four policy models of base policy model, planned policy model, implemented policy model and recommended policy model. The base policy model is established to test or validate the reliability of the model written in the software package of the General Algebraic Modeling System (GAMS). The contents of the other three policy models depend on policies and their publication time. Two indicators of average production costs and percentages between supply quantities and design production capacities of the factories are used to examine optimal solutions generated by solving these three policy models. A sensitivity analysis is conducted to check how the optimal solutions are affected if domestic price elasticity levels are equal to or 30% less than or 30% higher than external price elasticities. The SEM for nine products and 29 regions reveals that the supply targets cannot be achieved by 2015 period because planned and implemented policies would force tree growers, owners of paper factories and owners of furniture enterprises to sell their products at unprofitable prices and in unprofitable quantities. For these stakeholders’ activities to be financially sustainable the number of planned new wood-processing factories should be reduced and the design production capacity of each new factory should be increased. For example, planned new small-scale paper factories with design production capacities of less than 300,000 tonnes a year and engineered-wood factories with design production capacities of less than 50,000 tonnes a year should not be built. Closure of existing small-scale paper factories of less than 50,000 tonnes by 2015 should be considered. Consequently, the planned area of planted production forest in northern Vietnam should be less than 900,000 ha, considerably lower than the planned level of about 1.2 million ha by 2015. These conclusions are similar to qualitative opinions asserted by various domestic and international experts, who have argued that there are too many factories planned in Vietnam. The SEM developed and applied in this thesis provides a framework for systematic analysis of policy options for the wood and wood-processing industries and the feasibility of planned production targets

Recommended methods to re-calculate regional and total economic surpluses after solving spatial equilibrium models by the non-linear programming method

The current non-linear programming method does not derive regional economic surpluses and may derive an imprecise maximized value of the total economic surplus. The main reason is that the integrals for supply functions will automatically take regional non-economic producer surpluses into account if any intercepts of supply functions is negative. Consequently, the derived values are always lower than the real regional and total economic surpluses. The unknown regional economic surpluses and the imprecise total economic surplus will limit the suitable application of the model for broader contexts including game theory analysis, international trade policy analysis, and even GDP calculation. This paper recommends two formulae applied for two types of functions, namely original and inverse supply and demand functions, to calculate the regional and total economic surpluses of commodities. The two methods can be converted to each other conveniently, for example by using an inverse matrix of coefficients of original supply and demand functions to solve coefficients of inverse supply and demand functions. A numerical example is used to illustrate the spatial equilibrium model for 2 products and 3 regions with original linear supply and demand functions

Macro developments in the China and Southeast Asia beef sector

The 'international livestock revolution' (ILR) literature has documented an increase in livestock production in developing countries over the past 40 years that has not kept pace with consumption, leading to increased prices and trade. These trends were forecast to increase into the future, with important implications for development, agribusiness and policy in developing countries. The trends have unfolded as forecast in the dynamic and diverse China and Southeast Asia region, but to a much greater extent than forecast and in ways that could not have been foreseen. The present study revises official statistics and incorporates data on informal trade flows to show that the gap between consumption and production, as well as trade flows both within the region and into it, are much higher than has been officially reported. It draws on a large range of secondary and primary data to investigate the drivers of change, including reasons for lagged production responses to price growth in terms of cattle numbers, and higher than officially reported productivity indicators

A review of the formulation and application of the spatial equilibrium models to analyze policy

This paper reviews alternative market equilibrium models for policy analysis. The origin of spatial equilibrium models and their application to wood and wood-processing industries are described. Three mathematical programming models commonly applied to solve spatial problems - namely linear programming, non-linear programming and mixed complementary programming - are reviewed in terms of forms of objective functions and constraint equalities and inequalities. These programming are illustrated with numerical examples. Linear programming is only applied in transportation problems to solve quantities transported between regions when quantities supplied and demanded in each region are already known. It is argued that linear programming can be applied in broader context to transportation problems where supply and demand quantities are unknown and are linear. In this context, linear programming is seen as a more convenient method for modelers because it has a simpler objective function and does not require as strict conditions, for instance the equal numbers of variables and equations required in mixed complementary programming. Finally, some critical insights are provided on the interpretation of optimal solutions generated by solving spatial equilibrium models