Competitive capacity of Vietnam’s rice industry

tion capacity of the industry is also reflected in the product quality of that industry [94]. The quality of products highly 8 appreciated by consumers shows that the production capacity of the country is high. In other words, it reflects that the country's rice industry is highly competitive compared to other competitors in the market. 2.3.2. Production cost Production cost is also one of the important factors to assess the competitiveness of an industry. Production costs include fixed and variable costs. In which fixed costs are expenses whether in production or not, farmers, traders or businesses still have to pay such as interest payable, office rental, land rental, and other expenses, registration fees The second cost is variable costs, which are expenses depending on production or production activities, such as: farmer's input costs including seeds, fertilizers, plant protection products; expenses related to machinery and services include: pumping, irrigation, renting earth-working machines, renting reaper, threshing; Labor costs include: sowing/transplanting, weeding, spreading fertilizers, spraying drugs; payments for family workers; and other expenses ... 2.3.3. Selling price Real price fluctuation is a criterion measuring the change of the average price of the rice industry over time compared to the general consumer price. Price is one of the important factors to determine the industry's competitiveness in the market. The prices of products in the world market are formed based on the law of international goods supply and demand. 2.3.4. Export market share One of the bases for assessing the competitiveness of an industry is its share of its exports in the market. To assess the export market share (ESij) of an industry between country i and product j we will evaluate by the ratio of the export turnover (Xij) of product j by firms in country i to the total value of those products exported worldwide. The export market share is calculated by the following formula: ESij = 100*(Xij / ∑iXij) In which: ESij is the export market share of industry j in country i Xij is the export value of industry j in country i ∑iXij is the total value of industry j exports worldwide. In addition, the export market share is calculated for each commodity in the rice industry such as rice in rice husks, brown rice, unbroken milled rice, and broken milled rice. 2.3.5. Competitive advantage in international market Competitive advantage in the international market plays an important role in product development of any country. This index is to measure the competitive advantage of a product in the international market. According to Balassa (1965) [10] this index reflects the difference in factor resources between countries, their competitiveness in the international market. Specifically, the RCA index is calculated as follows: In which: - RCApi is the competitive advantage of product p of country i - Xpi: export value of item p of country i - : total exports of country i 9 - Xwi: export value of p products of all countries of the world - : total exports of all countries in the world. According to Balassa (1965) [10], The RCA index can be identified as follows: - 0 < 1 : commodity p of country i has no comparative advantage. - 1 < 2 : commodity p of country i has low comparative advantage. - 2 < 4 : commodity p of country i has moderate comparative advantage. - 4 < : commodity p of country i has a high comparative advantage. 2.3.6. Degree of export diversification The disversity of exported goods shows the competitive capacity of the rice industry in the large market, meeting the diverse needs of consumers. To evaluate the diversification of exported products, the author uses the formula of Herfindahl-Hirschman as follows: In which: DP is an diversification index of exported goods. Xp is the export value of the p item, and X is the total of export value. This index has a value from 0 to 1. If the export in the industry is diverse, this index has the value of 0. Conversely, if the export is concentrated on only one item, this index’s value is 1 which describes the concentration. According to Bonnal (2010) [11], the index of export market diversification developed by Herfindahl-Hirschman is as follows: In which: Xij,t is the export value of the country to the market in the year of t, and Xt is the total export value of the i country. This index has a value from 0 to 1. If the export is diverse in all markets, this index has the value of 0. Conversely, if the export is concentrated on only one market, this index’s value is 1 which describes the concentration. 2.4. Các yếu tố ảnh hưởng đến năng lực cạnh tranh của ngành 10 According to Porter (1990) [22], the quality of the business environment is assessed by four general characteristics, which are (a) conditions of production, (b) conditions of demand; (c) related and supporting industries and (d) the context for enterprises' strategy and competition. These elements form the four corners of a diamond and are commonly referred to as the Porter Diamond Model. Besides, it is also necessary to emphasize the role of the local government in planning and implementing economic policies; shape the needs and set standards for competition towards improving productivity. Graph 2.1. The Porter Diamond Model Source: England (2011) [1] 2.4.1. Groups of internal factors 2.4.1.1. Conditions of business productions of the rice industry Geographical position, topography, land Weather climates Infrastructure structure Qualification of human resources Area of production land 2.4.1.2. Enterprises’ strategies, structure and competition In production and business activities, in addition to making good use of resource factors to enhance the competitive capacity, the agents involved in rice production and 11 supply must also establish relationships with different objects. These relationships include relationships with customers, relationships with suppliers, relationships with credit institutions, relationships with industry players, and relationships with the government. 2.4.1.3. Marketing capacity With the rapid development of the current market, when the competition in the global market increases, the necessary abilities to meet the requirements of domestic and foreign customers are more important than ever to companies. Therefore, a big problem in the growth of companies is how to convert their marketing capacity into competitive advantage. 2.4.2. Group of external factors 2.4.2.1. Demand conditions The market is a very important business environment for enterprises. The market is a place to consume products and looking for inputs through the purchase and sale of output goods and services and input factors. The market is also a tool to shape and guide the business operations, through demand, price, profit to shape business strategies and plans. Thus, the stability of the market is very important to the operation of enterprises in general and the competitiveness enhancement of enterprises in particular. 2.4.2.2. Related and supporting industries Industries support other industries in providing inputs and related industries have international competitive capacity. The close relationship between industries will facilitate innovation and technological enhancement to sustain competitive advantage more sustainably. In the value chain of the industry, the integration of the stages in the business production process plays a very important role in creating the sustainability of the industry. 2.4.2.3. Roles of the Governement The state regulates through the application of specific food safety standards with different levels of safety that food products must meet and be controlled to ensure the compliance [15, 21]. * Supporting role In addition to the function of promulgating and controlling the compliance with food safety regulations and standards, in developing countries, the state plays an important role in supporting manufacturers to apply the food safety standards [14, 25]. The state's supportive policies towards other factors in the production chain such as consumers are also mentioned [24]. Based on the theory built above, the research model in this dissertation is as follows: 12 Graph 4: Research model Source: The author self-synthesized 2.5. Experience in enhancing the competitiveness of the rice industry in some countries and lessons for Vietnam 2.5.1. Experience of Thailand 2.5.2. Experience of Taiwan 2.5.3. Experience of Japan 2.5.4. Experience of India 2.5.5. Experience of Korea 2.5.6. Experience of Indonesia 2.5.7. Vietnam’s lessons learned + Focusing on policies to support farmers, traders and enterprises + Focusing on investment in production lines, modern technological equipment + Promoting trade promotion and product marketing + Adjusting trade policy on agricultural products + Building association models in production Chapter 3 SITUATION OF COMPETITIVE CAPACITY OF THE RICE INDUSTRY IN VIETNAM 3.1. Current situation of the development of Vietnam's rice industry in the period of 2010-2019 In recent years, supportive policies for rice growers such as price stabilization and producer support policies, and general agricultural support policies such as investment in irrigation development, and trade liberalization, exemption of irrigation fees, agricultural extension, scientific research support, credit loans and others have created a 13 significant impetus to promote rice production and contribute to increasing Vietnam's rice productivity. Preliminary output in 2019 reached about 43448.2 thousand tons. 3.1.1. Vietnam's rice production by regions 3.1.2. Vietnam's rice production by harvests 3.2. Situation of competitive capacity of the rice industry in Vietnam 3.2.1. Production capacity * Regarding the area Through the data table, the rice area in the study period from 2010 to 2017 tended to increase. In the four years from 2010 to 2013, the rice area was continuously expanded, increasing from 7489.4 thousand hectares to 7902.5 thousand hectares; the annual average growth rate is 2.72% / year. However, from 2014 to 2019, the rice area tends to shrink. In 2019, the rice area was 7470.1 thousand hectares. This was also the lowest rice area in the country during the study period. * Regarding productivity of rice production According to the statistics of the productivity of Vietnam's rice industry shown in chart 3.9, it can be seen that the productivity of Vietnam's rice industry tended to increase steadily in the 2018-2019 period. However, considering the whole period, Vietnam's rice productivity has many fluctuations showing instability in rice cultivation and production. The unstable productivity also reflects the limited competitive capacity of Vietnam's rice industry. In general, Vietnam's rice productivity is quite high compared to other countries in the world and the group of 5 largest rice exporting countries. However, considering the current development of technology and science, the growth rate of Vietnam's rice productivity is not really adequate. This shows that the exploitation of technology and scientific development in rice cultivation as well as the enhancement of the competitive capacity of Vietnam's rice industry are ineffective. * Regarding product quality Most customers rated Vietnam's rice to be good and high-class, especially in terms of the amount of vitamins and minerals in the rice. However, compared to other countries in the region, Vietnamese rice is not really appreciated. A comparison of the evaluation results between Vietnamese and Thai rice shows that Thai rice is highly appreciated by consumers for vitamins, minerals, design and aroma. This shows that although Vietnam's rice has been highly appreciated, it has not really captured the advantage in the eyes of consumers. 3.2.2. Production costs According to a report by the United States International Trade Commission (USITC) on production costs in the rice industry of countries, Vietnam is the country with the lowest total costs in which, the majority of Vietnam's production costs are variable costs such as fertilizers (23%), labor (19%), other chemical materials (13%), machinery (13%). According to USITC’s estimates, on average, Vietnamese farmers use 35.79 USD/1 ton of rice. Compared to other countries in the top five, Vietnam's cost of fertilizer procurement is the second highest, only after Thailand. Currently, the expenses of chemical materials and fertilizers of Vietnamese farmers are still high. This shows that the shift from traditional farming to organic farming has not been strongly promoted. This is also one of the causes of reducing the competitive 14 capacity of Vietnam's rice industry in the market when the current market demand is strongly shifting to the use of clean and organic products. The expenses of hiring labor accounts for a large proportion of the total production cost while the rice productivity tends to decrease, this shows the limitation in the quality of human resources in Vietnam. 3.3.3. Price The price of rice that Vietnamese farmers sell at the farm ranges from 282.7 USD / ton - 315.8 USD / ton. Rice prices were quite stable in the period 2015-2018. Compared with other countries around the world, the price of rice sold by Vietnamese farmers on their farms has increased in recent years. If in 2010, the price of rice that Vietnamese farmers sold on the farm was 289.5 USD / ton, ranked 51 st in the world, in 2018, the price of rice that Vietnamese farmers sold on the farm decreased to 282.7 USD / ton, ranking 37 th in the world. Compared with the top 5 rice exporting countries in the world shown in Table 3.15, the price of rice that Vietnamese farmers sell on farms is quite high. In the period 2010-2011, the price of rice that Vietnamese farmers sold on the farm stood at 2/4, after Thailand and the US. In 2012, the price of rice sold by Vietnamese farmers on the farm fell to 4 th place in the group of 5 countries. In the period 2014-2016, Vietnam's rice price rose to the 2 nd position in the group of 5 countries. In 2017 and 2018, the price of rice sold by Vietnamese farmers on the farm was the highest among 5 countries. 3.3.4. Market share of rice exports Vietnam always ranks high in rice export value worldwide. In 1997, Vietnam's rice export value ranked 4 th worldwide, behind Thailand, the US and India. In 2010, Vietnam has risen to second place in the world after Thailand. However, in the following years, Indian rice took the position of Vietnam and pushed Vietnam down to third place. This result shows that, compared with the rice of neighboring countries Thailand and India, the competitiveness of Vietnam's rice industry is still weak. The main export rice item of Vietnam is unbroken milled rice. The main export products with large market share such as unbroken milled rice and broken milled rice have many fluctuations and are on a downward trend. This shows that Vietnam's rice exports are not stable, not able to maintain their market share in the international market. 3.3.5. Competitive advantage in international market The author's calculation results show that Vietnam's rice industry has a high competitive advantage in the international market with the number of RCA in all years greater than 4. Competitiveness of Vietnam in the rice industry is high but tends to decrease during the study period. In terms of commodities, Vietnam's competitiveness is highest in non-broken rice, followed by broken rice, and the lowest is in rice husk. However, compared with the market share of total exports of rice, unbroken rice and rice in rice husks, the competitiveness of Vietnam is not really adequate. 3.3.6. Export diversification Vietnam has a very high HI index which indicates that the diversification of Vietnam's exports of rice products is very low. The fluctuations in Vietnam's rice HI index indicate that Vietnam's rice export trend is gradually shifting from diversification to export in certain markets. This also implies that Vietnam's rice industry competitiveness in the international market tends to decrease. In some products such as unbroken milled rice, Vietnam's rice husk has a sizable market share, but the diversification is not high, showing potential risks and limited competitiveness of Vietnam. In addition, Vietnam's HI index 15 fluctuates a lot, showing that Vietnam's rice export performance is not stable and affected by many external factors. 3.4. Factors affecting the competitiveness of Vietnam's rice industry 3.4.1. Statistical analysis results describe the factors Through the assessment of the actors participating in the rice supply chain, based on the actual situation and based on the diamond model of porter, the PhD. student assesses the rice industry's competitiveness based on porter's diamond model as follows: Diagram 3.1: The current situation of factors affecting Vietnam's rice industry competitiveness according to Porter's diamond model Source: compiled by author 3.4.2. Evaluate impacts of factors on the competitiveness of Vietnam's rice industry 3.4.2.1. Exploratory factor analysis 3.4.2.2 Multivariate regression analysis + Good communication infrastructure. + Farmers' qualifications are gradually improving and more experience accumulated. The intercropping model achieves higher efficiency than in other rice growing countries. + Favorable climate and soil help improve rice yield and quality. + Administrative infrastructure is well developed. + Trade in rice products is strongly developed. - Lax market linkage. - Trading activities through many intermediaries has increased costs. - Supporting institutions are not strong, especially financial institutions. - The majority of labors are unskilled, lack of specialized human resources. - Knowledge source (R&D base) is developing day by day but still at a weak level. - Small field scale, high farming costs. - Infrastructure does not meet the requirements. + There are many preferential policies to develop the rice industry such as tax, interest, labor. + Strong competition between domestic and foreign businesses. + The variety of product groups is development opportunities for businesses, especially in the direction of integration. + Transparency of the administrative background. - Enterprises have not built material sources yet. - State agencies have not yet estimated capacity to supply raw materials in parallel with investment attraction policies. - High input costs. - The standards for the quality of rice products are few and the enforcement of management is weak + Supporting institutions: Associations, universities, research institutes, State institutions have recently developed and have gradually received necessary assistance. - The supplier is not strong enough. - Poor market and brand promotion support services. - The related industries are not strongly linked. + Demand for rice products is very positive, many new rice products have high added value. + Vietnamese rice products are now known to many countries around the world. - The domestic market is dominated by imported rice products. - The export market is increasingly demanding on quality, requiring international standards such as GAP. Notes: - (+) is advantage. - (-) is disadvantage STRATEGIC AND COMPETITIVE LANDSCAPE OF BUSINESS PRODUCTION CONDITIONS DEMAND CONDITIONS SUPPORTING & RELATED FIELDS 16 After the regression of the factors affecting the competitiveness of the rice industry with control variables including Age, Gender of the actors involved in the rice supply process obtained the following results: Table 3.41: Regression model Coefficients a Model Unstandardized Coefficients Standardized Coefficients t Sig. Collinearity Statistics B Std. Error Beta Toleran ce VIF 1 (Constant) -2,369 0,309 -7,664 0,000 BC 0,214 0,072 0,252 2,986 0,003 0,984 1,017 CO 0,096 0,032 0,106 2,972 0,003 0,955 1,047 MS 0,488 0,040 0,440 12,283 0,000 0,954 1,049 IEI 0,362 0,032 0,397 11,182 0,000 0,972 1,029 MK 0,166 0,073 0,190 2,281 0,023 0,964 1,038 SS 0,289 0,034 0,314 8,477 0,000 0,894 1,118 Gender -0,143 0,058 -0,088 -2,492 0,013 0,984 1,016 Age 0,008 0,003 0,097 2,710 0,007 0,962 1,040 a. Dependent Variable: SC Adjusted R Square 0,608 F 62,091 Sig. .000 b Source: Analysis of survey results i) Verifying the appropriateness of the model Explanation level of the model: The regression of the model to obtain adjusted R2 results which is 0.608. Thus, 60.8% change in rice sector competitiveness is explained by independent variables of the model. In other words, the model of the topic can explain 60.8% of the change in the competitiveness of Vietnam's rice industry Appropriateness level: According to the statistical result, F = 62,091 with Sig. = 0.000 <0.01 it can conclude that the given model is consistent with the actual data. In other words, the independent variables are linearly correlated with the dependent variable and 99% of confidence level. ii) Test the multi-collinearity phenomenon According to the regression results table, the last column (VIF) on the multicollinearity test between the independent variables indicates that all VIF coefficients are <2, so there is no multicollinearity between the independent variables. iii) Regression coefficient test * Group of internal elements The group of internal factors includes business strategy, structure and competition (IEI), production and business conditions of the rice industry (BC) and marketing capacity (MC). The standardized beta coefficient of “rice production and business conditions” (BC) is 0.418 and is statistically significant at 0.001 indicating that production conditions have a positive impact on competitiveness of Vietnam's rice industry. 17 The beta standardized estimation coefficient of the "business strategy, structure and competition" variable (IEI) has a positive impact on competitiveness at the statistical significance of 0.001, showing the importance of strategy and structure of businesses in enhancing competitiveness. Accordingly, when business strategy, structure and competition increase by 1 standard deviation, the competitiveness of Vietnam's rice industry increases by 0.397 standard deviation. Pricing strategies, product designs, developing relationships with customers, relationships with suppliers, ... help rice enterprises to have more favorable conditions in production and trade as well as improving competitiveness. "Marketing capacity" (MC) also has a positive impact on the competitiveness of businesses with the standardized beta coefficient of 0.190 and statistical significance at 0.001. This shows that, when the marketing capacity of enterprises increases by 1 standard deviation, the competitiveness of Vietnam's rice industry increases by 0.190 standard deviation. The higher the marketing capacity of enterprises is, the faster the ability to develop new products and improve existing products in response to market diversification is. The price tactics to compete with competitors are more flexible, helping businesses easily dominate the market. * Group of external factors The group of external factors includes domestic and international demand conditions (MS), Related and Supportive Sectors (CO), and Government Role (SS). The standardized beta coefficient of “demand conditions” (MS) is 0.440 and is statistically significant at 0.001. It is estimated that when domestic and international demand conditions increase by 1 standard deviation, Vietnam's rice industry competitiveness increases by 0.440 standard deviations. The beta standardized coefficients of the variable 'related and supporting industries' (CO) have a positive effect on competing capacity at the statistical significance of 0.001, indicating the importance of supporting industries and stakeholders. is important in enhancing the competing capacity of Vietnam's rice industry. Accordingly, the supporting and related industries increase by 1 standard deviation, the competing capacity of Vietnam's rice industry increases by 0.16 standard deviation. In the current globalization trend, the d