Factors Affecting Agricultural Product Production

Vietnam

1.3.2.1. Factors affecting agricultural production

When talking about the production process in general, people are often concerned with the impacts of subjective factors (from within the production industry) and objective factors (impact of the environment in which the production industry is operating). Factors affecting the production process of agricultural products in general, and agricultural production for export in particular, are not outside of those groups of factors.

Along with the achievements in production, the market economy with the State's management in the direction of socialism, with the interweaving of many economic sectors, is increasingly being perfected and developed. In the process of innovating the management mechanism, the State has proactively and effectively applied legal tools, orientation plans, policies and other levers. In particular, the innovation of policies on prices, taxes, investment, circulation, import and export... as well as the application of new scientific and technological achievements have a particularly important position and role in promoting agricultural production in general, and agricultural production for export in particular, to develop at a stable and sustainable pace.

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At the same time, the State has strongly implemented the policy of adjusting production relations in rural areas to liberate production capacity, exploit the labor potential and capital of the people. In addition to the general orientations for agricultural production development in each country such as planning, industry development plans, economic restructuring, investment structure for agriculture and rural areas; agricultural development strategies in each period and stage associated with specific tasks and goals of socio-economic development, policies directly impacting agricultural production in general, agricultural production for export in particular as follows:

a. Product pricing policy for agricultural export production

The starting point for this discussion is the export price for any agricultural product under consideration. In practice, export prices (and import prices) that more or less match market costs will be equal to domestic prices, if government regulatory policies are excluded. At this point, export and import prices provide a benchmark for the cost of consuming or producing the product to be compared back to the prices formed domestically. For price policy planning, to build and come to a decision on a specific price for an agricultural product, many factors must be considered, both domestic and foreign markets. The main lesson of the development experience over the 1990s of the 20th century is the importance of “external orientation”. For agriculture, as for other export-producing industries, this means that world markets provide the most relevant signals about relative shortages or surpluses of individual goods and, therefore, the demand for their production or consumption. Export prices—the prices a country receives for exporting a good—transmit this signal to domestic importers and exporters through the market system.

We have become a member of the World Trade Organization (WTO), and accordingly, market policies and export commodity structures have also been expanded and developed. Market forces transmit import and export prices to domestic decision makers who are free to respond by importing or exporting. Unfortunately, the circulation system that transmits these signals remains inefficient and costly. Furthermore, institutional rules, although facilitated by the competent authorities to be extremely “open” in the process of trade liberalization, are still completely unclear and problematic in implementation. This will increase trade risks and costs, and at a more serious level, it will also

prevent the effective transmission of world market price signals to domestic farmers, traders and consumers. While rapid response to opportunities in these markets would be an important source of economic development, especially of the agricultural economy, failure to transmit the necessary signals would be a major obstacle to that development.

The policy on export agricultural product prices is closely linked to the interests of farmers - those who directly produce these products. However, consumers and the macro economy are placed in the vehicle of the world market, which is always moving and changing in different positive and negative directions. In recent years, the actual prices of agricultural products for export have changed, increasing many times compared to before. This situation affects the interests of consumers as well as producers (those whose main income comes from agricultural production). The agricultural economy can create many jobs and contribute to national income. To prevent sudden price fluctuations due to instability, the domestic agricultural economy must be given high priority. Vietnam is the second largest rice exporter and must accept market conditions as they are, especially in the context of strong international economic integration. Accordingly, it is necessary to pay attention to the mutual effects when applying policies to support the development of agricultural production. In particular, previous support on prices and export bonuses will no longer exist (these forms are considered direct export subsidies and therefore cannot be implemented), but will be shifted to support in other forms that have been specifically stipulated in the commitment - support can be provided through policies such as investment in rural infrastructure, irrigation, application of science and technology to create good, high-quality varieties...

A matter of concern for a country with complex geographical conditions

As in Vietnam, an efficient and low-cost circulation system is an important condition to increase the capacity of agricultural producers and processors for export. At that time, the agricultural product price policy had two parts: (1) following world export prices for many years with lower production and circulation costs; (2) preparing backup mechanisms to stabilize domestic prices if the world agricultural market suddenly had a serious shortage of agricultural products.

b. Agricultural investment and credit policies create conditions for the development of agricultural export production.

In this section, starting from Keynes's formula, does increasing credit (meaning lending more) lead to faster economic growth? The essence of the main problem is how to encourage and ensure more credit for investment projects to develop agricultural production for export and processing facilities. Currently, there is still a debate between two approaches: (1) trusting the distribution and decision of the Government, when not directly distributing loan capital to priority purposes and sectors; (2) the financial liberalization program is widely applied in a number of developed countries.

The traditional analysis and formulation of John Maynard Keynes (1935), focused on keeping interest rates low to encourage investment to produce higher output. Keynes's approach also emphasized the need to reduce cash to ensure maximum production. This Keynesian theory fits well with the dominant, attractive and seemingly conventional supply strategy of financial development. In this strategy, finance is provided primarily for productive needs. Therefore, special lending programs and institutions are established to serve priority customers and commodities. It has been pointed out that the presence of bankers will stimulate businesses and producers to strengthen production management, reduce product costs and accumulate capital.

investment. Many developing countries have accepted and implemented Keynes's formula. Compared with neoclassical economic theory, the experience of the previous countries has built some foundations of an effective agricultural credit system including:

Stable macroeconomic conditions;

Maintain reasonable prices, especially for agricultural products and materials for agricultural production (i.e. prices must reflect real scarcity or the level of existing goods that are dangerous in a market economy);

Issue a complete system of laws and regulations governing the operation of the financial system.

For our country, to effectively implement credit policies for agriculture in general and agricultural production in particular, it is necessary to pay attention to the following issues:

Pay attention to credit investment for scientific research, introducing new varieties, high technology, agricultural extension, irrigation, market development and professional training for agricultural export producers;

Mobilizing capital sources from the population to create funds for lending in banks;

Strengthen cooperatives and people's credit funds at the central and local levels to exploit and mobilize the potential and strengths of these entities to serve the production of agricultural products for export;

Strengthen financial discipline of agricultural export production and processing enterprises and banks to create financial soundness to serve agricultural export production.

c. Research, deploy and increase productivity in agricultural export production

Productivity growth is considered a key factor contributing to growth.

production of agricultural products for export; it has a direct impact on improving the quality and competitiveness of agricultural products. All activities of research, development, farmer training, infrastructure construction, implementation of price policies, investment and credit contribute to increasing productivity. When it comes to the application of science and technology in agricultural production, applying new crop varieties with high productivity and quality in conjunction with agricultural extension, irrigation, ensuring irrigation water for agricultural product production, as well as paying attention to in-depth investment, technological innovation towards modernizing equipment and agricultural product processing lines will contribute to increasing product value, improving the competitiveness of agricultural products, increasing the technology content in products, thereby increasing the value of export products, bringing income to the budget.

In order for science and technology to achieve the goal of developing agriculture with high productivity and quality, sustainably, it is important to bring the level of science and technology of many sectors to catch up with countries in the region and increase the contribution of scientific and technological advances to the added value of agriculture. Continue to promote and improve the quality of agricultural extension work to the grassroots and farmer households, in order to help farmers understand and apply scientific and technological advances to improve productivity, quality and reduce the cost of agricultural products... In each specific field affecting the quality and competitiveness of our country's agricultural products, it is necessary to focus on the following stages:

- Regarding breeds: ensure that over 70% of breeds used in the production of agricultural products for export are good breeds, with high quality and resistance. Promote research on hybridization and application of hybrid superior breeds. Invest in

Ensure the requirements for building infrastructure for research on creating new varieties and producing original varieties. Allocate sufficient funds to import genetic resources and advanced technical varieties to serve the research, crossbreeding of new varieties and to rapidly multiply good varieties for mass production.

- Regarding investment in irrigation and drainage systems: To address the above issues, it is important to invest adequately in research and development, including technology transfer from abroad for domestic application. Along with this work, the process of infrastructure investment for irrigation systems must be in the direction of both investing in new construction and ensuring funding for maintenance, repair, periodic maintenance, and major repairs of seriously degraded irrigation works...

- Regarding preservation and processing: Research and apply modern technology to preserve, pre-process, and process agricultural products to reduce post-harvest losses, increase the value of goods, ensure international standards and quality, and diversify products for domestic consumption and export. In the immediate future, it is necessary to accelerate the process of technological innovation for existing production facilities and use new advanced technology for newly built production facilities, suitable to the needs and tastes of each commodity export market.

However, to do the above work, it is necessary to train a team of cadres with ethics, professional enthusiasm, ready for the task of developing agriculture and rural areas, serving the production of agricultural products with high quality requirements to meet domestic consumption and export needs.

d. Policy on developing small and medium enterprises serving the processing of agricultural products for export

Prioritize the development of small and medium-sized enterprises in

rural areas; consider this an important part of the strategy of industrialization and modernization of agriculture and rural areas.

Currently, our country has about more than 70% of the population living in rural areas. This is an economic area with great potential to direct other production sectors to exploit the strengths of this economic area. Experience from many populous countries in Asia shows that the development strategy from agriculture and rural areas is a wise and effective choice for the following reasons:

- Focusing on rural development will contribute to job creation, increasing farmers' income, and reducing the need to migrate to big cities and urban areas;

- Strengthen rural-urban linkages for sustainable development;

- Developing small and medium enterprises in the field of processing, circulation and distribution based on abundant local raw materials, contributing to improving the quality and value of exported agricultural products in particular and agricultural commodities in general.

Based on the strategies set out, developing small and medium enterprises serving the processing of agricultural products for export requires a relatively complete legal framework for these types of enterprises to develop with peace of mind. At the same time, there needs to be a system of mechanisms, policies, and levers to encourage small and medium enterprises to improve their operational efficiency. Accordingly, attention should be paid to the following policies:

- Regarding investment credit: support interest rates for investment in modern production equipment, new technology for production, preservation, and processing of agricultural products; form investment funds to invest in small and medium enterprises serving the processing of agricultural products for export; provide financial support for marketing information work;

- Regarding tax policy: exempt or reduce some types of taxes such as corporate income tax, property tax for small and medium enterprises in the first few years of operation in remote areas, especially difficult areas...

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