Tea value chain of nghe an province

hnology, and other productive factors such as infrastructure, services, education and training are also limited. Thus, with the studies on global value chains, analyzes are performed relatively sufficiently and diversely for the agricultural sector or for a specific agricultural commodity. However, on the analytical objective mainly towards the development of the activities of the actors participating in the value chain and combining the views of M. Porter, the authors analyze the factors. influence the value of actors in the value chain and propose solutions to increase the added value of enterprises in the chain. A few studies have mentioned the solutions of the government or provincial government agencies that can intervene in the chain to contribute to the development of the global value chains and propose solutions to the development of value chain in the industry. Agriculture. Although the proposed solutions have contributed to promoting the development of the 7 value chain, they are still fragmented and not linked to form an overall and effective development strategy of agricultural value chain. 1.2. Overview of researches on tea value chain 1.2.1. Overview of researches on tea value chain approached by Filière method A typical example of this approach is Sheikh Mohammed Rafiul Huquem (2014), with the research on tea value chain of developing countries and related issues, he suggested solutions in the economic and business conditions of developed countries. The author Ngo Thi Huong Giang (2010) in a study with the topic "Supply chain of Thai Nguyen tea - shortcomings and recommendations" analyzed the tea supply chain in Thai Nguyen province, pointed out shortcomings and suggested solutions to enhance the value of tea products in Thai Nguyen province through promoting the role of associations, the People's Committee of Thai Nguyen Province in participating in tea value chain, thereby contributing to enhancing the value of tea. Thai Nguyen tea products [70]. Up to now, using of the chain method in tea value chain analysis has not met the requirements of developing the tea industry in Vietnam in particular and in the world in general. With the economic integration process between countries, it is required that the analysis of tea value chain is not merely the stages in the supply chain in a region or locality but towards value chain analysis must be associated with international specialization of tea products. 1.2.2. Overview of researches on tea value chain approaching the method of competitive advantage From the point of view of competitive advantage, author Ariyawardana (2003) conducted research on tea producers in Sri Lanka, examining the competitive advantages that are related to the productivity of tea growers [30]. The study has shown that the factors that belong to the governance of tea growers affect the productivity of tea cultivation and the value of tea products, thereby proposing solutions on governance to increase added value for tea growers in Sri Lanka. The report of Agrrifood consulting international (2013) shows that Vietnam's tea value chain has two main channels, the first one is tea growers (farmers) and export tea processing enterprises. Martin Odoch (2008) suggested a number of solutions to improve the quality of tea leaves in the Republic of Uganda to supply commercial value chain, which 8 confirmed the role of tea producing intermediaries, emphasizing the strategy Marketing of the business [71]. Charles Kirimi Mbui (2016) studied the effects of strategic governance on increasing added value for tea exports in Kenya [34]. Research by Tsalwa S. Grace and Theuri Fridah (2016) on factors affecting tea value in tea value chain in Kenya, including: demand and type of market, government policy, strategic decision, labor skills [59]. 1.2.3. Overview of researches on tea value chain according to the global value method Currently, the researches on the global value chains for tea products are done quite a lot by the authors for many purposes. In general, the authors agree that tea value chain usually has 4 stages: (1) tea growing (production): often involves farmers growing tea by themselves or for tea production and processing enterprises. Each different actor in the tea planting stage will have different behaviors when participating in tea value chain; (2) tea processing: usually involves households or businesses making the transition from fresh tea to commercial teas serving market needs; (3) tea trade (domestic wholesale, retail or export): mainly related to the operation of a commercial enterprise or a household which self-sourcing and satisfying tea demand. 1.3. Research orientation of the thesis - Clarify the concept and description of tea value chain, which is approached from a global value chains and perspective combined with Michael Porter's perspective of competitive advantage; - Identify and quantitatively evaluate the factors affecting the development of tea value chain, in which emphasizing the role of factors such as economic policy and creating a business environment for businesses; - Proposing solutions for economic policies and creating a business environment for enterprises to develop tea value chain of Nghe An province, thereby contributing to efficient use of resources. 9 CHAPTER 2: THEORETICAL AND PRACTICAL BASIS OF TEA VALUE CHAIN 2.1. Tea value chain concept 2.1.1. Characteristics of the tea industry a. Characteristics of the production process b. Characteristics of tea products c. Investment characteristics d. Characteristics of human resources 2.1.2. Concepts and elements of tea value chain 2.1.2.1. Concept of tea i value chain Tea value chain is developed on the basis of inheriting the concept of value chain by Michael Porter and global CGT of Kaplinsky. According to Kaplinsky (2000): “A value chain refers to the set of activities required to transform a product (or service) from conceptual time, through different production stages, to distribution. to the end user and dispose of after use. A value chain exists when all participants in the chain work to maximize the value of profits in the chain ”. 2.1.2.2. Factors participating in tea value chain Source: Synthesis of Author Figure 2.1: Tea value chain Planing Processing Retail Consumption Export Retail Wholesale 10 2.1.3. Factors affecting tea value chain 2.1.3.1. Subjective factors: experience in tea production and trading activities of agents, technology, techniques, capital sources of agents and qualifications of actors. 2.1.3.2. Objective factors: institutional environment, consumer adoption with tea brands, business scale and development level of supporting industries 2.2. Model of factors affecting the development of tea value chain The dependent variable in the model is the ability to increase the value of tea products (GT), which is evaluated through four sub-criteria: (1) The ability to increase the selling price of tea products to consumers; (2) The ability to increase revenue and profit of enterprises; (3) The ability to satisfy the tastes of the end consumer; (4) The ability to respond to customer needs directly. The independent variables include: (1) The responsiveness of the input factor's quality (KN); (2) Effectiveness of economic policy (CS); (3) Level of linkage between actors (LK); (4) Degree of advantage from the business environment (MT). Relationships between variables can be described through a linear regression model as follows: GT = β0 + β1.KN + β2.CS + β3.LK + β4.MT (2.1) 2.3. Experience in developing tea value chain of some countries in the world and in Vietnam 2.3.1. Experience in developing tea value chain of some countries around the world 2.3.2. Experience in developing tea value chain of some provinces in the country 2.3.3. Lessons for the value chain development of Nghe An tea a. Enhance participation of actors of value chain b. Develop quality standards, tea production processes to meet the requirements of export markets c. Strengthen the role of government policies CHAPTER 3: THE CURRENT SITUATION OF TEA VALUE CHAIN DEVELOPMENT OF NGHE AN PROVINCE 3.1. An overview of Nghe An province 3.1.1. Socio-economic conditions of the Province 11 Nghe An province is located in the center of the North Central region, the North of Thanh Hoa province, the South borders Ha Tinh province, the West borders the Lao People's Democratic Republic. Nghe An plays an important role in socio-economic exchanges between North and South, constructing and developing marine economy, external economy and expanding international cooperation. In 2019, Nghe An has a population of 3,157,100 people, the gross domestic product (GRDP) of the province in 2019 reached 115,676 billion VND, the average gross domestic product per capita reached 36.64 million VND, the growth rate GRDP reached 8.77%. 3.1.2. Results of tea production and trading in Nghe An province Table 3. 1: Tea production and business results of Nghe An province in the period 2015 - 2019 No Norm Year 2015 2016 2017 2018 2019 1 Planting area, ha 7940 9440 9470 10200 10700 2 Harvest area, ha 7000 7500 8000 8400 10000 3 Production, tons 84000 89000 104000 117000 130000 4 Productivity, ton/ha 12 12 13 13 13 5 Continuous growth rate, % Planting area 100 118.89 100.32 107.71 104.90 Harvest area 100 107.14 106.67 105.00 119.05 Production 100 105.95 116.85 112.50 111.11 Source: Nghe An Department of Agriculture The tea harvest area of the whole province in 2019 is 10,000 ha with an average growth rate of 9.33%/year. Tea productivity of the province in the period 2015 - 2019 did not change much, reaching 120-230 quintals/ha. Tea yield of Nghe An is higher than the national average (the whole country in 2019 is 125.9 quintals/ha) and compared to other tea growing provinces in the country, Nghe An tea yield is only lower than 2 provinces - Lam Dong and Thai Nguyen province. 3.2. Situation of tea value chain in Nghe An province 3.2.1. Description of tea value chain in Nghe An province a. Planting and taking care of tea In the period 2015 - 2019, tea is grown mainly in the area of 2 districts Thanh Chuong and Anh Son. The average output growth rate in the period 2015 - 2019 is 11.53% /year. The district with the largest tea production in the two districts with the largest tea area in the province also has the largest 12 proportion, reaching 62.1% and 23.5% of the province's tea output, respectively in Thanh Chuong and Anh Son districts. In order to improve tea productivity and output, the province has invested in research and application of new varieties with high yield, suitable to the natural conditions of the province. In 2014, the People's Committee of Nghe An province issued Decision No. 87/2014/QD-UBND on support for tea production as follows: Support 1,500 VND/gourd of Tuyet Shan tea varieties, density of 3,300 pots/ha; Supporting tea varieties LDP1, LDP2, high quality tea at 400 VND/pot, density 1,600 plants/ha; Support for costs of planting and land preparation for LDP1, LDP2 tea, high quality tea, Tuyet Shan tea with the rate of 5,000,000 VND/ha for districts of Con Cuong, Ky Son, Tuong Duong, resettlement area for Ban hydropower Draw in Thanh Chuong district and 2,000,000 VND for the remaining districts. b. Tea processing The whole province currently has 86 processing facilities with a total design capacity of 871 tons of tea buds/day, with the need for processing raw materials of 120,000 tons/year (the processing time is expected to be 230 days/year). In which, processing of enterprises with technological and equipment capabilities accounts for 328 tons of fresh buds/day. In these enterprises, machinery and equipment are relatively synchronous, a number of processing lines with modern technology, the quality of products produced is accepted by domestic and international markets. In Nghe An province there are 4 tea processing establishments with large design capacity, organized in the form of limieted company and using modern industrial processing lines. In addition, there are 2 small processing establishments, Youth Volunteer Team 8 and Youth Volunteer Team 10, involved in processing green tea with a design capacity of 1 ton of fresh buds/day. Participating in green tea processing activities also have 75 small and medium-sized processing establishments, mainly organized as business households with an average design capacity of 7 tons of fresh buds per day. Total capacity according to the current design of the Company is 262 tons of fresh tea buds/day, with an expected processing time of 230 days/year, the annual capacity of the company will be 60,260 tons of fresh tea buds/year. With this processing capacity, the Company is able to supply to the market 12,000 tons of dry tea/year with CTC tea product structure accounting for 45%; green tea accounts for 55%. 13 Data on commercial tea production and tea production value of Nghe Anh Province in the period 2015 - 2019 are shown in Table 3.4 Table 3. 4. Production and value of tea products in the period of 2015 - 2019 Norms Year Avarag e 2015 2016 2017 2018 2019 Tea production, thousand tons 16.8 17.8 20.8 23.4 26.0 20.96 Gross output, billion VND 3326.4 3933.8 4950.4 6201 9308 5543.92 Continuous index % Tea production 100 105.95 116.85 112.50 111.11 111.54 Production value 100 118.26 125.84 125.26 150.10 129.34 Source: Nghe An Department of Agriculture The data in Table 3.4 shows that: commercial tea output and production value up to the tea processing period of the province tend to increase steadily in the period 2015 - 2019. Average growth rate of commercial tea output products reached 11.54%/year while the average growth rate of production value reached 29.34% in the period 2015 - 2019 shows that besides expanding the area, increasing tea processing capacity, tea processing department in the province also improves the quality of products, increases the volume of tea for export. The results show that tea production value tends to increase significantly higher than the growth rate of tea production. c. Tea trade Tea production and export value of Nghe An province in the period 2015 - 2019 are listed in Table 3.5. Table 3. 5. Tea export volume and value of Nghe An province period 2015 - 2019 Norms Year Avarage 2015 2016 2017 2018 2019 Export volume (103 tons) 5.37 5.95 6.38 6.82 7.37 6.38 Export value (103 USD) 6605.1 8627.5 10176.1 11150.7 12713.3 9854.5 Ratio of Export volume/Production volume,% 31.96 33.43 30.67 29.15 28.35 30.43 Continuous index % Export volume 100 110.80 107.23 106.90 108.06 108.24 14 Export value 100 130.62 117.95 109.58 114.01 117.79 Source: Nghe An Department of Agriculture The data in Table 3.5 shows that the annual tea exported output of Nghe An province is from 6.38 thousand tons, accounting for 28.35% - 33.43% of the total tea production of the province. Tea export output depends on market demand. In 2015, the province's tea export output reached 5.25 thousand tons with the export revenue reaching 5.2626 million USD; In 2019, the export tea output will reach 7.37 thousand tons, the revenue from tea export will reach the export turnover of 13.45 million USD. 3.1.2. The current status of stages in the value chain Tea value chain of Nghe An province is very simple, the actors participating are not much, the added value when passing through the actors is not large. The biggest contributor to the value chain is the processing agent, which is also the one that benefits the most from tea value chain. Table 3. 6. Some value indicators of the stages in tea value chain Stages Planing Processing Wholesale retail Yields, thousand tons 122.78 26 17.87 26 Average cost, MillionVND/ton 2.94 183.84 279.19 276.96 Average revenues, MillionVND/ton 23.36 245.12 308.5 325.84 Average profit, MillionVND/ton 8.64 61.28 29.31 48.88 Value added, MillionVND/ton 116.78 128.34 63.38 17.34 Rate of value added, % 35.84 39.39 19.45 5.32 Source: Nghe An Department of Agriculture The data in Table 3.6 shows that, in 2019, the tea output of Nghe An is 26 thousand tons, consumed through 2 channels: wholesale and retail with the respective proportions of 68.73% and 31.27% of the total consumption of the province. In Nghe An province, the major contributor to the value chain is the planting and processing of tea. The stage of tea planting accounts for 35.84% of the value of tea products with the main ingredients being the salary of workers and initial investment for tea plants. The processing stage accounts for 39.39% of the added value with the main part of the value being depreciation of fixed assets due to investment in the processing line, expenses related to product research and development ... . 15 3.3. Analysis of factors affecting the development of tea value chain in Nghe An province 3.3.1. Level of fulfillment requirements for input factors The factors responding relatively well to the quality of inputs such as seeds, fertilizers to tea growing agents and raw tea to tea processing agents with scores of 3.85/5. It shows that one of the factors contributing to enhancing tea value chain is the awareness of the role of input factors. The scientific and technical responsiveness was also assessed well with an average score of 3.78/5. Source: Analysis results of survey data according to SPSS 20.0 Figture 3.1. Level of fulfillment requirements for input factors 3.3.2. Effectiveness of provincial policies All respondents highly appreciated the science and reasonableness of agricultural development policies in particular and economic development policies of the province in general with a rating of 3.53/5. Source: Analysis results of survey data according to SPSS 20.0 Figure 3.8. Effectiveness of the policies In the period 2015 - 2019, the province is implementing the following policies on tea plants: 3.00 3.20 3.40 3.60 3.80 4.00 The degree of meeting the quality Level of meeting requirements for tea The level of meeting the business The level of meeting the requirements Degree of meeting the requirements 3.85 3.78 3.37 3.55 3.68 3.00 3.10 3.20 3.30 3.40 3.50 3.60 Scientific and rational level of tea Information about tea industry The support for businesses from the Stability of economic policy Effectiveness in implementing economic The degree of advantage of the policy to 3.53 3.43 3.41 3.20 3.19 3.24 16 + Support 80% of the settlement value for the key irrigation works, canals, concrete. For tea growing households, when investing in small watering works, anti-drought irrigation for tea is supported 40% of the price of machines and equipment. + For tea growers who are workers in agricultural companies, they will be able to borrow money on deferred payment to buy seeds, fertilizer materials, and irrigation against drought. + Support 1,500 VND/gourd of Tuyet Shan tea variety, density of 3,300 pots/ha; Supporting tea varieties LDP1, LDP2, high quality tea at 400 VND /pot, density 1,600 plants/ha; Supporting costs of planting and land preparation for LDP1, LDP2 tea, high quality tea, Tuyet Shan tea with the rate of 5,000,000 VND/ha for districts of Con Cuong, Ky Son, Tuong Duong, resettlement area for Ban hydropower Draw in Thanh Chuong district and 2,000,000 VND for the remaining districts. + Master plan on development of industrial tea plants in Nghe An province to 2020; Planning for processing agricultural and forestry products mainly in the province of Nghe An up to 2020 has set out specific targets on planning material tea areas associated with processing factories. This is an important document in the effective use of the land fund, step by step expanding the acreage, improving productivity, product quality, and sustainable tea development. 3.3.3. The degree of association between the actors The factor that is appreciated when establishing linkages among actors is awareness of the importance of contracting between actors and the stability in economic relations with partners. This will contribute to creating stability and safety in the business process of actors. Source: Analysis results of survey data according to SPSS 20.0 Figure 3.9. The degree of linkage between actors in the value chain 3.40 3.45 3.50 3.55 3.60 3.65 Stable level of economic relationship Stable level of economic relations of Significance in signing economic Diversity of business partners in Responsibilities of enterprises in 3.61 3.57 3.64 3.50 3.57 17 The number of tea processors increased rapidly but not associated with the raw material areas. Family processors are willing to buy raw materials of any quality that makes people not want to try to produce with better quality products, the quality of products is decreasing, farmers' incomes go down, competitiveness in the international market is low. In tea value chain, the chain of links between private enterprises and farmers is quite effective, the quality of processed tea is guaranteed and the quantity consumed is relatively stable. However, the link between private enterprises and farm households in this value chain is still quite lax. When the season is right, a private enterprise can force the price, but when there is a shortage of goods, the farmer sells other places with higher prices. The interests of enterprises in this chain are not always parallel to farmers, even, sometimes the opposite does not create a high motivation to stimulate development. 3.3.4. The efficiency level of the business environment Survey results show that the factors highly appreciate the favorable role of information systems related to the development of tea value chain of Nghe An province. The development of science and technology is also facilitating the development of tea value chain. However, the opinions are that, in the past time, businesses have not received favorable conditions from policies, associations or financial institutions. In addition, the roles of associations in providing information to support actors and in developing links between actors in the value chain has not been well implemented, somewhat limiting the possibility of developing tea value chain of Nghe An province. All actors in the chain are in need of loans, especially tea processing households. Through the survey, it shows that the average capital of tea growing households is not much, on average from 40-50 million VND/household. The capital source is mainly household equity. About 49.3% of households get loans from banks. The number of households who have borrowed money is not much, because now most tea gardens have come into operation, so the need for capital investment is not much. 18 Source: Analysis results of survey data according to SPSS 20.0 Figure 3.10. The efficiency level of the business environment For households, the loan conditions is more difficult than the procedure. In Bank for Social Policies, the household must be a poor household and must have a guarantee organization or unions to borrow capital. Normally, banks will approve loans for households with fast repayment time and effective business plans. Therefore, many households find it difficult to get loans to invest in tea production and business because they cannot meet the conditions. 3.3.5. Impacts of factors to development of tea value chain in Nghe An province Table 3.7. Results of multiple regression analysis Coefficientsa Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) .633 .196 3.238 .001 KN .314 .033 .460 9.432 .000 CS .229 .033 .342 7.004 .000 LK .083 .030 .125 2.762 .003 MT .203 .032 .287 6.347 .000 a. Dependent Variable: G.T Source: Analysis results of survey data according to SPSS 20.0 From the analysis results, the multiple regression function is determined as follows: GT = 0,46*KN + 0,342CS + 0,125LK + 0,287MT According to the values of regression coefficients received, variables ability to satisfy quality of input factors (KN), efficiency level of economic 3.00 3.10 3.20 3.30 3.40 3.50 3.60 Development of tea logistic system locally and nationwide Support for businesses from financial institutions Support for businesses fr