Competitive and comparative advantage of the rice industry in the Mekong River Delta of Vietnam

The study estimated the competitive and comparative advantage of the rice industry in the Mekong River Delta (MRD) of Vietnam. Resource cost ratio (RCR*) in terms of private price was used to measure the competitive advantage, and resource cost ratio (RCR) in terms of social price was used to measure the comparative advantage of the rice industry. To identify the key factors affecting competitive and comparative advantage, a sensitivity analysis was conducted. Based on the secondary data on rice production, trade, yield and other information during the 1975-2005 periods, Vietnamese rice production has increased because of the economic renovation since 1986. The increase in rice production could be attributed to both expansion of rice area and higher productivity. Even when contribution of agriculture and the rice sector to the economy has been reduced gradually, they still remain as the main sector. The MRD is the rice bowl of Vietnam, which contributes 50 percent of rice production and 90 percent of rice exportation. Rice exportation is mainly based on volume as the rice export quality is low. A policy analysis matrix (PAM) of the rice industry in MRD showed that, the rice industry in MRD was profitable in terms of private and social prices. The utilization of resources in rice production was efficient. Based on RCR* and NPP estimates, the rice industry in MRD had a competitive advantage in rice production. Rice production in winter-spring season had a greater competitive advantage than summer-autumn season. Angiang province was found to be more competitive than Cantho and Dongthap in rice production. Dongthap showed the lowest competitive advantage among the three provinces. Using the RCR and NSP estimates, the study found that MRD also had the comparative advantage in rice production. Angiang was still more competitive than the other two provinces. However, Cantho had the lowest comparative advantage. The sensitivity analysis revealed that RCR* and RCR were sensitive to changes in export price, exchange rate, fertilizer price, wage rate, and land rent. The competitive and comparative advantage of the rice industry was reduced by the implementation of trade liberalization. The study recommended that diversification in agricultural development should be encouraged to reduce the risks brought by trade liberalization. To maintain and improve the competitive ability in rice production, Vietnam should (i) adopt modern postharvest technologies to improve rice quality, (ii) develop and integrated rice marketing chain from farmers to exporters, (iii) enhance the capacity to do rice market analysis and forecast, (iv) promote coordination and competition among rice-exporting enterprises, and (v) establish a system of rice standards and create a trade mark for Vietnamese rice.