Summary of Capital Sources to Support and Encourage Tea Production in the Region

Decision No. 27/2008/QD-TTg dated February 5, 2008 of the Prime Minister on a number of policies to support socio-economic development for the provinces in the Northern midland and mountainous region until 2010; Decision No. 17/2006/QD-TTg on the Seed Program, Decision No. 107/2008/QD-TTg dated July 30, 2008 of the Prime Minister on a number of policies to support the production, processing and consumption of safe vegetables, fruits and tea, and Circular No. 59/2009/TT-BNN guiding this Decision.

Based on reality, some localities have proactively issued a number of quite open policies to encourage the development of tea production such as Phu Tho, Thai Nguyen, Yen Bai. Local policies focus on areas such as: subsidizing new high-quality tea varieties, providing preferential loans and supporting credit interest rates, supporting training and building agricultural extension models, supporting the development and registration of specialty tea product brands. The Departments of Agriculture and Rural Development, Departments of Industry and Trade, provincial agricultural material companies, seed stations, provincial agricultural extension offices and local authorities always have close relationships with tea farmers in the transfer of tea care techniques through short-term training courses, "field" conferences, building demonstration models, opening product introduction fairs, which have contributed significantly to improving the scientific and technical level and the level of tea cultivation of people in the region.

Regarding investment capital, support and encouragement for tea production in the region, most provinces provide loans to people with preferential interest rates to plant new and intensive tea plantations, and restore tea hills. The loan amount for planting new and renovating old tea plantations ranges from 10 - 38 million VND/ha, and for intensive tea plantations and restoration is from 5 - 7 million VND/ha. The loan disbursement period is 3 - 5 years, and the debt repayment period is 5 - 7 years.

Thai Nguyen, Lao Cai, Phu Tho, Lang Son, and Tuyen Quang provinces have provided 20-50% support for purchasing new varieties. Lao Cai province has introduced a policy of supporting loan interest rates in addition to preferential loans or 50% of bank interest rates.

Lao Cai and Yen Bai provinces support tea growers by implementing a policy of insurance on raw material prices for production. Most provinces in the region, especially Thai Nguyen, Lao Cai and Phu Tho, provide capital support for agricultural extension activities.

Table 3.2: Summary of capital sources to support and encourage tea production in the region

Support Content	Duration loan (year)	Loan amount (million VND/ha)	Support level interest subsidy (%)	Done present (ha)
1	New planting	3-5	10-38	8.3	2,050
2	Intensive farming	1	5 - 7	8.3	800
3	Renovating old tea	3-5	10-38	8.3	1,320

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Source: Compiled from the Departments of Agriculture and Rural Development of provinces in the region

To enhance tea production, the provinces in the region have implemented a tea development program using ADB funds and funds from the Vietnamese Government through technical support activities to ensure tea quality for farmers, especially for large-scale tea farms in the provinces.

In 2009, the key tea growing provinces in the Red River Delta implemented policies to encourage investment in developing tea production, by supporting tea-producing farmers with tea growing and processing tools such as small pumps, small rotating drums for drying tea, small tea rolling machines with a total support amount of 88,710 million VND. Nearly 20 communes in particularly difficult areas with nearly 120 hectares were supported for poor households with 1-2 sao of tea with an amount of up to nearly 2,000 million VND. In particular, the provinces also focused on supporting inputs for production by supporting transportation costs of up to nearly 1,000 million VND.

Provinces in the Red River Delta region also cooperate with tea associations, training institutions, research institutes, universities, and training institutions to organize training courses for businesses and processing facilities in the region. Technical training

tea processing techniques, good agricultural practices (VietGAP), integrated pest control (IPM), organic tea production and training courses on ISO 9001:2000 quality management system, training on food safety management system (HACCP). The number of tea production and trading establishments supported with training and education is up to 900 enterprises with a support amount of up to 260 million VND. In addition, for enterprises and production establishments that proactively invest in depth such as: technological innovation, research and production of new products, research and development of new varieties are all supported by the Government. In 2009, the amount of support for these activities was 1,240 million VND, the number of enterprises participating in in-depth investment was 9 enterprises.

In recent times, the major tea-growing provinces in the region have received a lot of external assistance from government cooperation projects, technical and financial support from non-governmental organizations for tea production and processing activities, such as the integrated pest management program of CIDSE - a Dutch non-governmental organization. This organization has implemented 14 IPM programs for tea in Thai Nguyen and Phu Tho provinces. Project effectiveness analysis shows that tea productivity in tea gardens that implement the IPM program increases by 15-40% compared to tea gardens that do not, and the cost savings due to implementing the IPM program is about 25-30 USD/ha [15].

The Mountainous Rural Development Program funded by the Swedish International Development Agency (SIDA) is a poverty reduction program implemented by the Ministry of Agriculture and Rural Development in five mountainous provinces: Yen Bai, Phu Tho, Thai Nguyen, Ha Giang, and Tuyen Quang. The program mainly helps poor communes and poor households in the provinces with technical and financial support to develop tea production and processing.

Tea growers in the region now consider tea an important industrial crop and have invested large amounts of capital to expand their acreage.

tea and develop small-scale processing factories. They always want to improve and develop tea production and processing but lack long-term credit sources, good varieties and advanced technical support. Therefore, projects and funding from outside are a good opportunity for tea producers and traders to improve productivity, quality and value of tea products.

In general, the development policy of the tea industry is an important orientation for the tea-growing provinces in the Northeast region in directing the development of production scale, processing technology and product consumption. It is the basis for adjusting the forms of tea production territorial organization to suit practical requirements. Although the sources of investment capital and support for tea production in the region are not much, they have contributed to positive changes in the forms of tea production territorial organization in the region. Tea producers have proactively invested in the direction of better quality and efficiency.

3.1.1.4. Trade promotion support work

Since Vietnam became a member of the World Trade Organization (WTO), the Government's incentives for businesses, especially State-owned enterprises, will no longer exist or will be increasingly reduced according to the Enterprise Law and the roadmap that the governments of WTO member countries have committed to. Vietnam's tea import tax will also gradually decrease. Thus, foreign businesses will have more opportunities to enter and dominate the market in terms of land, raw material areas, equipment, technology, labor, raw material sources, products and services of ours, which means that the level of competition within the tea industry will increase, and it is inevitable that some businesses will go bankrupt.

To encourage tea exports, the Government has abolished taxes and not implemented tea export quotas. In addition, the Government imposed a 75% tea import tax (effective from January 15, 2002) to protect domestic production. However, in the process of trade liberalization for economic integration,

In the world, this import tax rate is too high and not in line with the agreed commitments, specifically in the implementation of CEFT/AFTA and APEC, Vietnam must reduce import tax on agricultural products from 0% to 5% by 2006. Thus, at this point, the tea industry must open up and accept competition right on its "home turf".

The key tea-growing provinces in the Northeast region have coordinated with the Central Tea and Fruit Tree Development Project and the Vietnam Tea Association to co-organize the conference on “Standardizing the quality of the National Brand of Vietnamese Tea”. Through this, businesses can see the need for branded products when integrating internationally, so it is necessary to improve product quality.

3.1.2. Vertical form of organization of tea production territory

3.1.2.1. Forms of tea production organization in the Red River Delta region

Currently, in the Northeast region, the forms of direct production of raw tea exist in popular forms: production households, farms, cooperatives, and various types of enterprises.

* Tea production household

Currently, the Northeast region has about 240,000 tea-growing households. The tea-growing area of households accounts for about 60% of the total tea area of the region, the remaining area belongs to farms, cooperatives, state-owned enterprises, and joint-stock companies [49]. Most households have small-scale production, with an average tea-growing area of about 0.3 hectares per household. In tea production, the household form is divided into two forms of production organization, which are contract-based production households and unaffiliated production households.

Contract farming households: currently there are two types, (1) farmers sign contracts with enterprises, but do not include social insurance. Land use rights still belong to enterprises, receiving information, technical progress

technique with partial support from enterprises. For this form, producers do not have to worry about the output market, because most of their products are sold to factories. Although the selling price is sometimes lower than the free market price, but because the purchase volume is steady, the purchase price is relatively stable and is adjusted according to the market price, so tea growers can rest assured in production.

(2) Farmers with land sign contracts with companies. After the Government issued Decision No. 80/2002/QD-TTg on encouraging the purchase of agricultural products by contract, this form was encouraged to develop strongly. The contracts agreed upon in this association are quite diverse: in some cases, the company supplies input materials, guides technical processes and purchases tea from farmers at prices agreed upon at the beginning of the season; in other cases, the company only signs contracts to purchase products for farmers at agreed prices and does not provide input services. This association is strong when the company's purchase price is equal to or higher than the market price. Contracts are easily broken when the market price of tea is higher than the company's purchase price. In addition, it is very difficult to handle cases of contract breach.

Non-affiliated production households (independent production households): these are households with small production scale, often in remote and mountainous areas, with limited access to and application of science and technology, production is mainly based on traditional experience and exploiting the fertility of the land. Households that own tea growing land can borrow capital from banks to invest in production, but often use the loan capital ineffectively. However, this form of production organization is very flexible, households can sell fresh raw tea buds, but can also invest in processing green tea to sell to the free market.

As we all know, tea plants have natural biological characteristics that require meticulous care from human hands. Therefore, tea cultivation is very suitable for household production organization, because households are the

MAP 3.1: CURRENT STATUS OF TEA PRODUCTION ORGANIZATION FORMS IN THE NORTHEAST REGION

PhD student: Ta Thi Thanh Huyen

a miniature society, they have full means, tools of production as well as their responsibilities and benefits from the fruits of their family's labor. This form of production organization is a fairly popular agricultural production model in developed industrial countries.

* Farm form

In addition to small-scale tea-growing households, some households with production experience, capital and especially land resources, have developed into tea farms of relatively different scales, but not many, usually with an area of 1 hectare or more. Farm owners are dynamic, experienced people who know how to apply technical advances to tea production for high productivity. According to the survey results organized by the Tea Corporation and the Tea Association in 2004, the characteristics of the tea-producing farm form are: (1) farm owners have a high level of production organization, know how to calculate profits and losses, boldly invest in production to bring high income; (2) are willing to learn, know how to apply technical advances to production and have the ability to disseminate experience and advanced techniques; (3) know how to develop diversified business, exploit the advantages of the resources they own; (4) hire seasonal laborers and idle agricultural laborers; (5) Ability to cooperate with other entities in production and business.

According to the General Statistics Office in 2009, in the Northeast region, there are currently 1,089 farms growing perennial crops. Of these, Bac Giang province alone has 757 farms, mainly fruit farms [68]. The number of tea farms is 192, accounting for about 20% of the total number of farms in the region, the remaining farms mainly grow other long-term industrial crops, such as fruit trees, cinnamon, and star anise. These figures show that the number of tea farms is still very limited.

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