Platt Perspective on Business and Technology

Vietnam, doi moi and the search for business and economic strength and global relevance 8: considering Vietnam in an interconnected global context 2

Posted in UN-GAID by Timothy Platt on April 21, 2015

This is my eighth installment to a series on Vietnam (see the UN-GAID directory, postings 34 and following for Parts 1-7.)

I at least briefly touched upon the issues of farming and of land ownership in Vietnam in Part 2 of this series, citing there the pivotal role that agriculture and the agrarian way of live have held in what is now Vietnam and throughout its history. Under current law every Vietnamese citizen has a right to own and to farm their own land, and in large parts of their country you see seemingly endless small tracts of family farmed rice paddy and other agricultural holdings.

Small plot farming and its productive output feeds the people of Vietnam, just as small plot and “garden” farming fed the peoples of the Soviet Union as their large government controlled and centrally managed collective farms failed to do so (see Part 7 for a discussion of Stalin’s agricultural ambitions and their consequences.)

I return to this topic here in a more business and macroeconomics context, to consider both the dynamics of small farms as a basic standard and of large tract farming that can support modern technologies and economies of scale and produce crop yields that are of sufficient size and economy so as to make significant agricultural exports possible.

I do not in any way claim to have seen all of Vietnam but at least in my experience I only saw small farm holdings and small fields under separate cultivation in the North, with that all done by more traditional, pre-industrial means (e.g. using water buffalo pulled plows to till the rice paddies and to mix in the green manure plantings that had been grown there in the off-season to enrich the soil, and hand planting methods for sewing fields with young rice plants for crop cultivation.) And I saw large tracts of farmland that were farmed as such in the South, and particularly in the northern reaches of the overall Mekong River Delta. These large-tract farm enterprises can and do operate on a more industrial basis with modern mechanized farming equipment for preparing the land and planting and harvesting crops. And in the South, a more favorable and longer growing season allows for up to four crops per year where a colder climate generally limits northern agriculture to three crops per year at most.

Together, these factors make the South a much more favorable site for large crop production and for the development of export agribusiness capabilities – and in fact Vietnam does now export some of its agricultural crop production, as well as fish and other seafood products from its aquaculture enterprises (see Part 2.)

Coffee is one of Vietnam’s agricultural export products that proves to be an exception to the rule of mechanization. In general, larger scale farming allows for increased mechanization and even automation, that reduce costs per unit of land, and per unit of crop produced, creating greater efficiencies that can lead to larger scale crop sales and greater export potential. But this can only be made to work where crops grow and mature to a point where they can be harvested at a reliably uniform rate and across entire cultivated fields. Coffee beans grow and mature at different rates and even just on a single plant, so beans that are ready for harvest have to be hand-selected and hand-picked, so as to prevent disturbing the rest of the potential crop that is not ready for harvest yet. Even on the largest coffee farms, growing and harvesting crops is and is likely to remain very hands-on and labor intensive. But even there, large scale production from larger landholdings leads to greater opportunity for export sales and for more effectively negotiating best prices for their crops. Smaller coffee growing operations match this strength of scale by pooling their crop productions and offering their harvests to buyers together through cooperatives. In either case, buyers can secure larger crop yields from single sources, simplifying their purchasing, and I add their quality control efforts too. But most crops and their production can be mechanized for at least some steps of their production and harvesting. And even for coffee, scale per se can create greater export strength and opportunity.

• Larger overall producers – whether that means individual larger coffee farms or larger farming cooperatives, means stronger voices in setting the prices that their crops can be sold at.
• This, on a national and on a more macroeconomic level means greater overall foreign revenue coming into the country and strengthening its overall economy as a result.

And this brings me back to the issues of sales and export of raw unprocessed products, and the sales of higher price point finished goods that are produced from them. If Vietnam can increase its production of finished product agriculture offerings it can increase the levels of revenue coming into their country from that shift. Markets will continue to demand raw agricultural products such as rice, for example, but they are also open to the purchase of high quality rice products such as rice noodles, that would prove to be popular globally in importing countries’ marketplaces.

I have touched on several business sectors and industries in Vietnam now, and with them in mind turn to consider infrastructure development that would enable and expand Vietnam’s import and export strengths. The three areas of infrastructure development that I have focused upon for Vietnam in this series are:

• Transportation,
• Electrical power generation, and
• Telecommunications and internet access.

I chose to focus on these arenas for development for a variety of reasons. First, of course, I decided to focus on them because they are all high priority areas of development in Vietnam, and I add because I have directly seen how they are being developed there, and across the span of that country. But I also chose them for discussion here because they are so crucial to making Vietnam’s production capabilities and their agribusiness and industrial production competitive in the global marketplace – as well as for their holding wider-ranging potential for driving change in their country.

I find myself thinking back to the failures of Stalin’s collective farms as I write this, and to photos that I have seen of mountains of grain and other crops rotting on the ground because train transport could not be brought in to collect and distribute them quickly enough. I wrote in Part 7 of this series of the problems that centrally administered large scale farming created when all key decisions were made by distantly located managers who were selected for that on the basis of their Party loyalty and their ideological purity. But it would be just as valid to state that the Soviet era collective farms failed because the crops they could and did manage to produce could not be collected and delivered where they were needed efficiently enough, and because of an abject failure to coordinate infrastructure development and operation with farm development and operation. The trains never seemed to get where they were most critically needed when and where they were needed for this. Stalin did not coordinately develop the infrastructure that was needed for this if his collective farms were to succeed in feeding his nation’s people.

To cite one structurally built-in example of how this core infrastructure system failed, Russia’s railroad system did not follow any one single standard for track gauge (track width), so a train that could operate on one part of their system could not do so anywhere else, because its wheels would not fit to the tracks of the next patch of their overall rail system. This in fact stymied the Nazis when Germany invaded Russia during the Second World War, as these invaders could not use Russia’s rail systems against them – they could not use their trains on those tracks for long-distance transport. But the Russians could not either, and both before or after that war, as well as during it. So any goods (e.g. crops produced and harvested) that had to be shipped by rail any significant distance would have to be on-loaded and off-loaded and on-loaded onto a next train and several times and even many times – and with all the delays and mishaps that this could entail all essentially guaranteed to occur. Every such next step in this transportation process had to be separately negotiated and processed from the beginning, through that next bureaucratic administrative system and for that next stretch of track. And most of this paperwork had to be set up in advance of anything happening at all – with those harvested crops left out in piles exposed to the sun and rain.

Vietnam seeks to modernize and streamline their core infrastructure for increased efficiency and cost-effectiveness, and both for time and money considerations. And their goal in this is very specifically to make their production systems and their economy more competitive in the global marketplace and the overall global community of nations.

I am going to continue this discussion in a next series installment where I will look into the further-reaching implications and consequences of these infrastructure improvements as they shape and inform what Vietnam’s own people do and seek to do, and expect to be able to do in their own lives. And I will at least begin to discuss as set of points that I initially raised in Part 1 of this series as one of its overall goal here:

• How other countries relate to and interact with Vietnam.

I stated there that I will discuss at least some of the complex partly positive, partly negative realities of the relationship between Vietnam and China, and the likely emergence of closer alliance between Vietnam and the United States as it is being shaped by China’s and Xi Jinping’s emerging policies regarding the South China Sea and their immediate neighbors there. I will also discuss some of the issues of opportunity and need, for Vietnam to more closely work with and align with other nations flanking the South and East China Seas as they also face new and emerging challenges from China. Meanwhile, you can find this and related postings and series at the UN-GAID directory.

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