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Rice marketing in Viet Nam has rapidly developed into a complex system without the central management that policymakers once thought was necessary. Tens of thousands of traders handle millions of tons of rice every year, channeling it from surplus farmers to urban consumers, rural rice-deficit areas, and exporters. The role played by the state-owned enterprises in the rice marketing system is minimal, except in long-distance trade, where they dominate, and exports, where they have a legal near-monopoly.



RICE POLICY AND THE POOR


There was a simulation model constructed by Minot and Goletti to examine the impact of alternative rice marketing policies on prices, production, consumption, and income. Their model shows there is some justification for the government’s concern that eliminating rice export quotas would raise prices and hurt some Vietnamese households. The two delta regions, with 45% of the population, are rice-surplus regions that would gain from higher rice prices. The other regions of the country are rice-deficit areas that would lose on average. Most harmed would be poor urban households, nonfarm rural households, and those in the central highlands. At the same time, net gains to rice farmers and consumers would be around US$200 million. Furthermore, poor households would tend to gain both in absolute terms and relative to nonpoor households because the poor are predominantly rural farmers who benefit from higher rice prices. These gains, particularly in the delta regions, result in a slight reduction in overall poverty and an overall increase in household and national income. By replacing the quota with an export tax and gradually reducing the tax rate, the government could liberalize rice exports slowly. This option would have the advantage of generating revenue that could be used to alleviate the impact of higher rice prices through targeted assistance.

Gains from rice export liberalization depend heavily on the elasticity of demand for Vietnamese rice on world markets. The more elastic world rice demand is, the larger the benefits to Viet Nam of export liberalization. More accurate estimates of export demand elasticity for rice could thus help the government in its policymaking process. Removing restrictions on internal trade of rice would have little impact on average prices and incomes but would have large regional effects, lowering prices in the north and raising them in the south. The distributional effects would be relatively small, however, and would cancel one another out, so there would be no change in the national poverty rate.

(To be continued)





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Photo: Minority farmers are transplanting young rice from beds — the second step in rice cultivation process — at Bắc Hà District, Lào Cai Province, near Sino-Vietnam border.









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