Cạnh tranh trong chế biến thực phẩm ở Việt Nam

LIST OF TABLES

Table 1.1 Contribution of food processing to Gross Domestic Product 8
Table 1.2 Contribution of agriculture, forestry, and fisheries to exports 8
Table 1.3 Size of food processing enterprises 9
Table 1.4 Employment in food processing sector by type of ownership 9
Table 1.5 Value of fixed assets of food processing enterprises 9
Table 1.6 Value of capital of food processing enterprises 10
Table 1.7 Gross revenue of food processing enterprises 10
Table 1.8 Food processing enterprises with profits and with losses 10
Table 1.9 Fixed assets and revenue of food processing enterprises 10
Table 2.1 Trends in rice production in Vietnam 36
Table 2.2 Contribution of area, yield, and intensity to rice production growth 36
Table 2.3 Geographic distribution of rice production 37
Table 2.4 Geographic patterns in rice surplus (1996) 37
Table 2.5 Trend in the number and size of rice mills 38
Table 2.6 Geographic pattern in the number and size of rice mills (1995) 38
Table 2.7 Trends in production, consumption, and export 39
Table 2.8 Domestic demand for rice 39
Table 2.9 Trend in rice exports 40
Table 2.10 Rice exports by destinations (1995) 40
Table 2.11 Allocation of 1997 rice export quota 41
Table 3.1 Trends in coffee production 67
Table 3.2 Geographic distribution of coffee production (1996) 67
Table 3.3 Trends in coffee processing 68
Table 3.4 Characteristics of medium and large coffee processors in Dak Lak 68
Table 3.5 Cost structure of coffee processing 69
Table 3.6 Trends in coffee exports 69
Table 3.7 Coffee quality standards 70
Table 3.8 Import tariffs on coffee products 70
Table 4.1 Trends in fruit area 91
Table 4.2 Trends in fruit and vegetable production 91
Table 4.3 Geographic distribution of fruit and vegetable production in 1996 92
Table 4.4 Trends in fruit and vegetable processing 92
Table 4.5 Cost structure of fruit and vegetable processors 93
Table 4.6 Domestic demand for vegetables in Vietnam 93
Table 4.7 Trend in fruit and vegetable exports 94
Table 4.8 Trend in the unit value of fruit and vegetable exports 94
Table 4.9 Import tariffs on fresh and dried fruits and vegetables 95
Table 4.10 Import tariffs on fruits and vegetables products 95
Table 5.1 Trends in fishery production 115
Table 5.2 Geographic patterns in marine fisheries production 115
Table 5.3 Geographic patterns in inland fisheries and aquaculture 115
Table 5.4 Trends in seafood processing 116
Table 5.5 Geographic distribution of seafood export processing by province 116
Table 5.6 Geographic distribution of seafood export processing by region 117
Table 5.7 Largest seafood processor-exporters 117
Table 5.8 Cost structure of seafood processors 118
Table 5.9 Domestic demand for fish and shrimp in Vietnam 118

Table 5.10 Domestic demand for fish sauce in Vietnam 119
Table 5.11 Trend in the composition of seafood exports 119
Table 5.12 Trend in the value of seafood exports 120
Table 5.13 Seafood exports by destination (1995) 120
Table 5.14 Seafood exports by product (1995) 120
Table 5.15 Exports and domestic sales by SEAPRODEX 121



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1. INTRODUCTION

This report examines the competitiveness of the food processing sector in Viet
Nam, focusing on four subsectors: rice milling, coffee processing, seafood processing,
and fruits and vegetables. The rationale for the study is that Viet Nam, as a member of
the Association of South East Asian Nations (ASEAN), is obliged to follow the trade
liberalization schedule defined by the ASEAN Free Trade Agreement (AFTA). Under
this agreement, Viet Nam will have to reduce the import tariffs on almost all goods
imported from ASEAN members to less than 5 percent by 2003. An important question
for the government is how trade liberalization is likely to affect the food processing
sector and what steps can be taken to make the transition a successful one.

This chapter provides an overview of the food processing sector in general and a
brief outline of its size and structure in Viet Nam. Chapters 2 through 5 examine each of
the four selected subsectors. In each chapter, production, marketing, processing,
domestic demand, and export demand are described. There is also a discussion of the
prospects and main policy issues for the sector. Chapter 6 provides the conclusions of the
study, including recommendations for the sector as well as for the four selected
subsectors.

1.1. International Patterns In Food Processing

Food processing can be defined as the transformation of agricultural commodities
as part of their preparation for human consumption. This definition encompasses
relatively simple activities such as cleaning, grading, and storage as well as more
involved transformations such as milling, canning, and freezing.

The food processing sector is best understood as one link in the marketing channel
between the farmer (or fisherman) and the ultimate consumer. On the one hand, the
characteristics of the raw material have a strong influence on the way the food processing
sector is organized. For example, the processing of goods that are bulky but highly
perishable, such as sugarcane, normally takes place close to the producing areas. On the
other hand, changes in the food processing sector are often driven by shifts in consumer
preferences. For example, rising incomes tend to increase the demand for convenience
foods and hence for food processing.




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1.1.1. Role of food processing in development

Food processing plays an important role in economic development. Food
processing can provide new outlets for agricultural output, raising the income of farmers,
who tend to be poorer than the non-farmers. This sector is sometimes involved in
providing credit, seed, and technical assistance to producers in order to obtain a higher-
value crop. Furthermore, food processing generates employment, more so than many
other manufacturing sectors because it is relatively labor-intensive. Furthermore, since
food processing plants are often located in rural areas, they create jobs for rural
households, where poverty is often concentrated. Finally, the food processing sector can
play a role in improving nutrition through fortification and the supply of foods with
longer shelf-life (Austin, 1996).

On the other hand, food processing should not be seen as a panacea. Food
processors may prefer to purchase raw materials from larger, well-endowed farmers
rather than the poorest farmers. The employment created by the food processing sector is
usually relatively low-paying, at least compared to other manufacturing sectors. And
processed foods are usually more important in the consumption patterns of high income
than low-income households. Nonetheless, a healthy and dynamic food processing sector
is an important component in the process of economic development and industrialization.

1.1.2. Distinctive characteristics of food processing

Food processing differs from other manufacturing sectors in several important
respects, mainly related to the raw material. First, the supply of the raw material for food
processing is often highly seasonal. For larger capital-intensive food processing
activities, this creates a strong incentive to store the commodity for off-season processing
when possible. When storage is not possible, food processors often attempt to stagger
production to reduce its seasonality. Alternatively, food processors may seek other
commodities to process in the off-season. In spite of these strategies, food processing
plants are sometimes idle during part of the year. Thus, excess capacity is not necessarily
a sign of poor management, although it does raise the unit processing costs.

Second, the supply of the raw material is difficult to predict and often varies
significantly from one year to the next. As a result, prices and profitability may fluctuate.
This complicates the procurement of the raw material and can result various types of risk



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reducing or risk shifting behavior such as fixed-price contracts with suppliers. Skills and
flexibility in procurement are critical to the success of food processing enterprises.

Third, the quality of the raw material used by food processors is quite variable, in
large part due to its perishability. This would not be a problem if quality could be
observed without cost, but it is often difficult for buyers for food processors to assess the
quality of the raw material. This leads to the establishment of grading systems and price
differences between different grades. The unavoidable subjectivity in the grading process
often leads to conflicts between producers and processors.

Fourth, as mentioned above, the raw material for food processors tends to be
“bulky” in the sense that the value per kilogram is low. This means that food processors
tend to locate their plants in or near producing areas, particularly when the commodity is
more perishable or more costly to transport in its unprocessed form than in its processed
form.

Fifth, the cost of raw materials accounts for a relatively large share of the total cost
of food processors, typically 50-80 percent in developing countries. The implication is
that procurement of high-quality raw materials at low prices is even more important in
food processing than in other manufacturing sectors.

Sixth, food processors are subject to special attention by the government because of
the importance of the final product in social well-being. Food processors face health and
safety regulations to protect the consumer. This is another consequence of the difficulty
in observing quality. In addition, they may face political pressure and/or government
controls to pay “fair” prices to farmers or to charge “reasonable” prices to consumers.

1.1.3. Trends in food consumption

The development of the food processing industry in most countries reflects the
changes in food consumption patterns as incomes rise. Engle’s Law, one of the most
universal patterns of economics, is that as income rises, the budget share allocated to food
declines. More precisely, the total expenditure on food continues to rise, but it does so
more slowly than total expenditure.

In addition, the composition of food expenditure changes with higher incomes.



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There is a shift from staple foods, which are generally the least expensive source of
calories, to foods that are more expensive on a per calorie basis. Fruit and vegetable
consumption rises more quickly than staple consumption, and meat, fish, and dairy
consumption rises the fastest.

As part of this process of diversification of diets, households begin to purchase
more processed foods. Some processed foods are easier and quicker to prepare, such as
instant soup packages or canned beans. Higher-income households are willing to pay
extra for semi-prepared foods because it saves them time, whether they use that extra
time for work or leisure. In a sense, with higher incomes, households can afford to "hire"
food processors to assist with food preparation. Other processed foods have the
advantage of allowing consumption of a greater variety of foods than are possible from
fresh products alone. Canned and frozen goods can be consumed thousands of kilometers
from where they were produced.

Another trend is that as per capita income rises, households begin to put greater
priority on food quality and safety. This may take the form of buying goods with trusted
brand labels rather than buying in bulk, since the reputation behind the label serves as an
assurance of quality. Another example is trend toward "organic" or "clean" fruits and
vegetables, responding to the fact that high-income consumers are willing to pay a
premium for produce grown without the use of agricultural chemicals. In addition, these
households are willing to pay extra for packaging that makes shopping or consumption
more convenient. Examples include beverages that are sold in one-portion containers
rather than 1-2 liter containers and canned goods with easy-to-open lids.

1.1.4. Trends in food processing

The trends in food consumption have important implications for the evolution of
the food processing sector. Initially, when the market consists primarily of low-income
consumers, the food processing sector concentrates on the minimum transformation
necessary to make the commodity edible. Furthermore, the processing is often done on a
small scale if technology permits. The drying of fish and fruits, grain milling, and
cassava processing are examples.

Later, processing responds to the demand for variety in the diet, becoming larger
and more diverse. As wage rates rise and markets expand, the scale and capital intensity



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of food processing gradually increase. It is worth noting that automation and capital
intensity are not the cause of development but rather the consequence. In other words,
development and higher wages make it profitable to purchase machinery that replaces
labor. In a low-wage economy, a modern capital-intensive processing plant may be less
profitable than a more labor-intensive one. In some cases, automated processes are
necessary to achieve export-level quality, but technical efficiency (in terms of conversion
ratios or canning rate) does not guarantee economic efficiency in the sense of
profitability.

As the complexity of food processing increases, a larger share of consumer food
spending goes to marketing and processing. As a result, the proportion of consumer
spending reaching the farmer declines. Finally, there is a paradoxical pattern regarding
the size of the food processing sector. Although it tends to grow in absolute terms, since
consumers are purchasing more processed foods, it tends to shrink as a proportion of the
manufacturing sector. This is a consequence of Engle’s Law - as incomes rise, a larger
share of household budgets are allocated to non-food items, creating the demand for
larger industrial and services sector. Once again, it is the trend of rising income that
causes the expansion of the industrial sector, rather than the reverse.

1.2. Food Processing In Viet Nam

1.2.1. Role of food processing in Vietnamese economy

The food processing sector is a large and rapidly growing industry in the
Vietnamese economy. In 1997, the value added in the food processing sector is estimated
to be about US$ 2.0 billion
1
. As shown in Table 1.1, this represents about 8.8 percent of
GDP and 35.5 percent of industrial value added. Furthermore, the contribution of food
processing to GDP appears to be growing. In 1991, food processing represented just 6.7
percent of GDP, but over the period 1991-1997, value added in food processing has
grown 14.0 percent annually, while GDP has grown only 8.9 percent annually.
Furthermore, the growth in the food processing has even outpaced, by a small margin, the
industrial sector in general.


1
This is based on the food processing value added of 4600 million dong in 1989 prices (see Table 1.1), a
GDP deflator of 0.117 for 1997, and an exchange rate of 13,000 dong/US$.



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Food processing also plays an important role in Viet Nam’s exports, as shown in
Table 1.2. Agricultural, fishery, and forest products, almost all of which are processed in
some way before being exported, account for US$ 3.2 billion in exports, or 36.8 percent
of total exports. In spite of the 19.7 percent annual rate of growth in exports of
agricultural, fishery, and forestry exports, its share in total exports has declined somewhat
due to even more rapid growth in other exports such as oil and manufactured goods.

The four subsectors that are the focus of this study, rice, coffee, seafood, and fruits
and vegetables, account for 25.3 percent of all exports, though this figure has varied
between 25 and 33 percent in recent years. The value of exports of these four
commodities has grown at 23.2 percent annually, almost as fast as the growth in the total
value of exports (26.9 percent). As will be shown later, seafood and rice are the most
important exports among the four, followed by coffee. Fruit and vegetable exports are
relatively small.

1.2.2. Characteristics of the food processing sector

A picture of the structure of the food processing sector can be obtained from the
1995 Economic Census, carried out by the General Statistics Office. The Economic
Census covered 2 million enterprises and 6.7 million workers
2
. This Census identified
163 thousand food processing enterprises employing 505 thousand workers. Thus, the
food processing sector represents about 8 percent of the enterprises and a similar
percentage of the employment in the enterprise sector (see Table 1.3). In other words,
employment per enterprises is roughly the same in food processing and other sectors.
Enterprises with less than 10 workers account for the vast majority of food processing
enterprises (98 percent) and most of the food processing employment (62 percent). Just
one quarter of the food processing sector workers are in enterprises with more than 100
workers.

Foreign-invested enterprises account for 6.2 percent of the employment in the food
processing sector (see Table 1.4). This percentage is somewhat higher than for
enterprises in general (4.8 percent), suggesting that the food processing industry attracts
foreign investment more than the average of other sectors.

2
The 1995 Economic Census included state, private, and foreign-invested companies, but excluded
farmers, who probably number 22-24 million. It is likely that the Census also omitted many self-employed
individuals, based on the average enterprise size (3.1) is large by international standards.



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Tables 1.5 reveals that food processing enterprises have less capital (fixed and
operating) than enterprises in other sectors, on average. Almost 84 percent of food
processing enterprises have less than 1 billion dong (US$ 91 thousand) in fixed capital,
compared to just 76 percent of all Vietnamese enterprises. A similar pattern holds if we
examine total capital, as shown in Table 1.6. Capital intensity can be measured by the
value of capital per worker. Although the available data from the 1995 Economic Census
do not allow the calculation of the capital intensity (capital per worker), the data do
suggest that food processing is less capital intensive than other sectors. This conclusion
is based on the fact that food processing enterprises have the same number of workers as
other enterprises (see Table 1.3), but have less fixed and total capital (see Tables 1.5 and
1.6).

Table 1.7 indicates that over three quarters (78 percent) of food processing
enterprises have gross revenues below 1 billion dong, compared to just 59 percent of all
enterprises. Once again, this suggests that food processing enterprises are, in general,
somewhat smaller than enterprises in other sectors.

The 1995 Economic Census also attempted to identify enterprises that were making
profits and those that were making losses. Although the results should be interpreted
with caution due to the difficulty in getting reliable data on profits, the results in Table
1.8 suggest that 9 percent of food processing enterprises make losses, compared to 11
percent of all enterprises. To extent that these figures can be trusted, they suggest that
food processing companies, although they are smaller and less capital intensive than
others, are no less likely to be profitable.

State enterprises dominate the food processing sector. According to Table 1.9,
state enterprises represent over half the value of fixed assets and 64 percent of the
revenue in the food processing sector. Foreign and joint stock enterprises follow with 42
percent of the fixed assets and 29 percent of the revenue.

In summary, food processing enterprises are relatively small. Not only do they
have less fixed capital and smaller revenues than other enterprises in Viet Nam, but 62
percent of them employ less than 10 workers. Second, food processing enterprises tend
to be less capital intensive than other enterprises in Viet Nam, probably reflecting simpler
technology. Third, the food processing sector is linked to a sector, agriculture, that is
declining as a percentage of gross domestic product.



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These factors might lead one to believe that food processing is a "backward" sector
with low profits and poor growth prospects. In fact, however, the food processing sector
is large, profitable, and growing, with a demonstrated ability to attract foreign
investment. This example illustrates some of the risks in assessing the potential of an
economic sector based on its level of technology or capital-intensity.

Table 1.1 Contribution of food processing to Gross Domestic Product

Year Gross
Domestic
Product
Industrial
value
added
Food
processing
value added
Food
processing
as pct of
GDP
Food
processing as
pct of industry
(billion dong at 1989 prices) (percent) (percent)
1991 31,286 6,042 2,100 6.7% 34.8%
1992 33,991 6,921 2,346 6.9% 33.9%
1993 36,735 7,766 2,602 7.1% 33.5%
1994 39,982 8,771 2,994 7.5% 34.1%
1995 43,797 9,998 3,460 7.9% 34.6%
1996 47,888 11,448 4,000 8.4% 34.9%
1997 52,198 12,960 4,600 8.8% 35.5%
Annual growth 8.9% 13.6% 14.0%
Source: Data provided by DSI, Ministry of Planning and Investment.

Table 1.2 Contribution of agriculture, forestry, and fisheries to exports

Year Total
exports
Export of agricultural, forestry,
and fisheries products
Export of rice, coffee, seafood,
fruits, and vegetables
(million US$) (million US$) (% of total exports) (million US$) (% of total exports)
1991 2,087 1,090 52.2% 629 30.1%
1992 2,581 1,276 49.4% 849 32.9%
1993 2,985 1,444 48.4% 923 30.9%
1994 4,054 1,905 47.0% 1,327 32.7%
1995 5,449 2,521 46.3% 1,806 33.1%
1996 7,260 3,051 42.0% 1,954 26.9%
1997 8,700 3,200 36.8% 2,204 25.3%
Annual
growth
26.9% 19.7% 23.2%
Source: Data provided by DSI, Ministry of Planning and Investment.

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