Vietnam Analytical Update: Addressing Climate Change in Vietnam

Vietnam Analytical Update | August 8, 2017
Authors: Hai Pham, Sunita Kapoor, Brian Ong
 
Analytical Update
 
 

Addressing Climate Change in Vietnam: Harnessing the Power of High-Tech Agriculture

Introduction: The Current Agriculture Problem

In recent years, climate change has hindered the continued growth of the agriculture sector in ASEAN. In Vietnam, climate change is beginning to drastically impact the livelihood of farmers, specifically rice farmers, in the Mekong Delta region. Rice farmers must deal with both droughts and floods, with such extremes making it difficult to rapidly adjust. Erosion of river banks from these floods has washed away much of the fertile soil and increased salinization of the Mekong Delta. In addition, Vietnam’s “Rice First” policy, implemented after the war to stabilize the economy and food security, has created an overdependence on rice. Overdependence on a single cash crop, combined with the above climate change factors in the Mekong Delta poses serious sustainability risks to rice farmers. Should these climate change trends remain constant, it is estimated that the nation may see a 7.2 ton decrease in rice yields and 3.2 percent loss of agricultural land by the end of the century.

In response to these factors impacting the agricultural sector, the Vietnamese government under the leadership of the Minister of Agriculture and Rural Development, Nguyen Xuan Cuong, has implemented a $4.4 billion credit line for high-tech agriculture projects to alleviate the volatility in the agriculture sector caused by climate change. In March 2017, Prime Minister Nguyễn Xuân Phúc signed a resolution providing a credit package worth VND 100 trillion (US$4.4 billion) to invest in the development of high-tech agriculture at lower than market rates. The State Bank of Vietnam (SBV) has been tapped to establish regulations to disburse this line of credit to Vietnamese farmers. For example, the SBV will offer credit packages with interest rates 0.5-1.5 percent lower than average rates. These credit packages will offer 6.5 percent interest rate for loans with a life of 12 months or less; 7.5 percent interest rate for loans that exceed 12 months. Agribank, Vietcombank, and the Bank for Investment and Development of Vietnam will offer credit packages for agriculture equipment, technology, production, fertilizer, and pesticides. The SBV reported that the total amount of outstanding loans for high-tech agriculture is $14.2 billion. At the end of May 2017, the amount of outstanding loans for agriculture and rural development was $50.6 billion, up 9.9 percent from the end of 2016.

The following report reviews the key stakeholders which make up Vietnam’s agricultural ecosystem and the myriad challenges they face in utilizing technologies to promote innovation and greater efficiency.

How We Define High-Tech and Climate-Smart Agriculture:

High-tech farming utilizes technology to produce more efficient, environmentally-friendly farming processes and better quality crops. Effective high-tech farming introduces leaner operations for farmers and potentially higher returns, better quality and unchanged quantity of food for consumers, and better environmental conditions for the people in the region.

Climate-smart agriculture, which is rather analogous to high-tech agriculture, presents innovative farming methods to alleviate some of the volatility in the agriculture sector because of climate change. If proof of concept and implementation are effective, climate-smart agriculture will help achieve national food security and economic development goals. These innovative methods incorporate elements of the following three principles:

  • Sustainable growth: these approaches must match or exceed the current crop production so that the nation is not at risk for food insecurity, and that income and standard of living for farmers does not decline
  • Enhances resilience and adaptation: this produces hardier crops that can better withstand natural disasters and fluctuations in weather, quality of soil, and quantity of water. This also encourages farmers to diversity their cash crops, rather than to rely on a single crop, such as rice
  • Mitigates/reduces greenhouse gas emissions: its purpose is to address climate change and reverse negative environmental impact

Climate Corporation, a subsidiary of Monsanto, utilizes data science to assist farmers increase their productivity. They offer software so that farmers can visually map their fields and assess the health of their crops. This will detect any weather threats to a farmer’s harvest, and they can address them proactively. In addition, they offer technology that allows farmers to test the quality of water and nitrogen levels in soil, to evaluate the growing conditions of their crops. They can keep record of this data and compare it to previous growing seasons. This allows farmers to adjust to the impacts of climate change and to work efficiently such that it minimizes the damage to the food supply and incomes of the farmers.

Stakeholders

To understand how effective high-tech agriculture can be implemented in Vietnam, it is necessary to analyze the various stakeholders to see who the key players are, who holds power, and where there may be pain points with respect to buy-in.

  • Bank for Investment and Development of Vietnam / State Bank of Vietnam – the Vietnamese government’s disbursement of $4.4 billion line of credit to the State Bank of Vietnam will give them major power in whether or not they will provide loans to farmers and other agriculture firms looking to invest in high-tech agriculture. It also allows them to use their discretion in defining high-tech agriculture.
  • High-tech agriculture firms – this new credit line offered by the State Bank of Vietnam creates a new market for these firms. One of the challenges for these new firms, especially foreign firms, is buy-in from these farmers. They must prove to these farmers that their techniques will yield long term and short term returns. One of their challenges is building that trust with local farmers and ensuring them that their programs and products fit the social, economic, and geographical landscape of Vietnam.
  • Rice farmers – these farmers may be more in favor of high-tech agriculture because salinization of the Mekong Delta has negatively affected their crop yields. It may also provide them with new, innovative farming techniques. This also gives them the opportunity to diversify their crops, but they must also be willing to take on this new challenge and risk.
  • Shrimp farmers – these farmers have benefited from the salinization of the Mekong Delta, so they are in a unique position. On one hand, the salinization of the Mekong has improved their business; it is evident from the projected $10 billion in shrimp exports. On the other hand, more and more rice farmers have shifted to shrimp farming, which may oversaturate the regional market. From an environmental standpoint, they may have concerns about the quality of water in which they farm their shrimp. They are placed in a unique position of power because they may have the upper hand in high-tech agriculture negotiations; this is especially relevant in the mangrove-shrimp deal.
  • Large and small scale farmers – large scale farmers may be more willing to adopt these new practices. They may have the commercial success to be able to take the risks and have the personnel to implement these changes. However, small scale, rural farmers may be more resistant to change. For these farmers, the land and operations may be generations old, and may not buy into these new techniques.

Current Action Plans and Examples of High-Tech/Climate-Smart Agriculture Projects Implemented in Vietnam

Example 1: The International Union for the Conservation of Nature and the Netherlands Development Agency launched the Mangroves and Markets (MAM) initiative which incentivizes shrimp farmers to preserve the mangroves in the provinces of Ben Tre and Tra Vinh.

  • According to a report published by CGIAR, the “profitability of shrimp farming has encouraged thousands of farmers in the deltas of Ca Mau in Vietnam to convert from rice farming to intensive shrimp aquaculture; Ca Mau is home to half of Vietnam’s shrimp production, an export industry worth US$3.1 billion.”
  • However, the expansion of shrimp aquaculture has been a major driver of mangrove deforestation in this region, increasing its vulnerability to impacts of climate change.
  • As part of the MAM project shrimp importers, traders, and over 5,000 shrimp farmers have been trained on breeding and marketing ecologically certified shrimp, replanting and management of the mangrove forest and mobilizing access for the farmers to certified carbon markets and carbon financing through the UN Reducing Emissions from Deforestation and Forest Degradation Scheme.
  • The farmers will also be certified organic shrimp farmers, which would allow them to sell their products at a premium on the international market.

Example 2: Vietnam Food purchases more than 100 tons of shrimp waste (shells and heads) from Ca Mau shrimp farmers every day and repurposes it for animal feed

  • Environmental impact: Shrimp waste in the past acted as an air and water pollutant; reusing this waste solves that
  • This has saved the province money because they no longer have to devote the resources to address environmental issues associated with shrimp waste
  • Cost-effective option – shrimp waste can be purchased for cheap

Example 3: Development of climate proof irrigation systems in the Mekong Delta (Hau Giang, Ben Tre, and Tien Giang provinces)

  • With periods of severe flood and drought, developing irrigation systems will assist farmers during the dry season
  • The Central Hydrometeorological Forecast Center forecasted higher floods than previous years
  • Develop a method to collect and store water from floods, specifically from major tributaries
  • Build irrigation system that utilizes this water during periods of drought
  • Issue exacerbated by development of Chinese dams, which have affected water temperature, water levels, and silt storage

Example 4: Developing rice cultivation methods that are resistant to severe drought or flood. With the understanding that reversing climate change will not be immediate, the Ministry of Agriculture and Rural Development (MARD) has recommended the implementation of a crop diversification plan to run through 2020, with the goal of reducing greenhouse emissions by 20 percent every year. The focus is on hardier crops that are more resilient to climate change

  • Many farmers grow a single cash crop, so if the seasonal harvest does not yield much, their income levels are substantially reduced. Crop diversification strategy reduces this risk, and will not be as damaging to their income
  • Grow rice and bamboo, rather than just rice; growing organic vegetables and raising fish provides additional income in landlocked regions
  • Mixed farming systems – an example would be growing grass for livestock feed, while also growing food products; tap into different market segments
  • More effective for large-scale farmers because they have the resources (land, manpower, capital) to accommodate different products
  • Switch from small-scale animal farms to bio-safety farms

Conclusion

It is critical to find the right balance of practices that address short and long term environmental and industry issues. Crop diversification or mixed farming systems may alleviate the income issues for farmers in the short term, but do not necessarily address the long-term environmental issues that high-tech and climate-smart agriculture seek to mitigate.

Although high-tech agriculture may be the answer to the many environmental issues at hand, there may be challenges regarding buy-in and implementation. Many farmers can be risk averse and reluctant to change. This is especially true when farmers feel they have a firm grasp of what works well for them, both in terms of operations and access to resources, and have done so for generations. However, if there are structures put in place that show these farmers that high-tech agriculture methods produce leaner, more efficient operations, then that may provide the security that these farmers want when adopting new techniques. It would be useful to provide farmers with literature or workshops to educate them about these innovative farming techniques, equipment, and products. This will ease the transition and implementation phases. Besides offering friendly interest rates for loans, the government to offer business or tax incentives to implement these new practices.

In terms of improving the implementation of high-tech agriculture programs, it may be helpful to launch a pilot program in certain provinces of Vietnam for one to three years to show its effectiveness. It is imperative that this pilot program be tailored for the region, especially when engaging with different types of farmers and introducing crops and equipment that are appropriate for the geography. At the end of this pilot program, it may be necessary to consult with a third party to assess the effectiveness of this program and to see if it can be scaled up for the rest of Vietnam. Furthermore, from a policy perspective, if the government commits to high-tech agriculture, then they may mandate the use of high-tech agriculture farming methods or products. If mandates are implemented, they should be done so in an incremental manner. It would be more effective to map out a five to 10-year process, rather than enforcing high-tech agriculture immediately.

High-tech and climate-smart agriculture firms with products and services have the potential of tapping into a new market in Vietnam and to contribute to reversing climate change. In some ways, these firms are introducing new technology, such as a new seed or irrigation system. However, in some contexts, just recognizing the environmental issues and offering creative solutions, such as the MAM initiative can be equally effective without changing the day-to-day operations of farmers in the region. It is with this balance where Vietnam may see effective change from a policy and industry perspective.

High-tech agriculture is a multibillion dollar industry in Vietnam and will have economic, social, public health, and environmental impacts. In building upon this momentum, the 39th ASEAN Ministerial Meeting on Agriculture and Forestry (AMAF) will serve as a platform for US companies to highlight some of their innovative practices that can be developed in the region. The AMAF seeks to improve the agriculture and forestry sectors, while fortifying food security in the region and addressing environmental issues.