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Vietnam: Decollectivization and Rice Productivity Growth

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Vietnam: Decollectivization and Rice Productivity Growth

Prabhu L. Pingali; Vo-Tong Xuan

Economic Development and Cultural Change, Vol. 40, No. 4. (Jul., 1992), pp. 697-718.

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Vietnam: Decollectivization and Rice
Productivity Growth*

Prabhu L. Pingali
International Rice Research Institute

Vo-Tong Xuan
Cantho University

I. Introduction
Vietnam reemerged in 1989 as a rice exporter after 2 decades of being
a net importer of rice. This change to an exporter status can be attrib-
uted in part to the decollectivization policies that were pursued since
1981. Prior to the policy reforms, Vietnam was importing rice despite
rapid and widespread adoption of modern rice varieties and technol-
'
ogy. In 1981, Vietnam departed from a collectivized agricultural pro-
duction system to an individual-oriented contract system of produc-
tion. The contract system was similar to the household responsibility
system introduced in China in 1979.~This allowed individual house-
holds to cultivate land independently, rather than as members of col-
lective work groups, and to be responsible for providing a contracted
amount of output to the state.
The switch to the contract system of production had a significant
effect on rice productivity. Annual growth in rice yield per hectare
was the highest during the period 1982-87, relative to the period 1950-
81 (table I). By 1984, average rice yields relative to 1980 yields for the
northern and southern provinces were 32% and 24% higher, respec-
tively. Likewise, during the same period, annual rice output per capita
increased by approximately 40 kilograms for both the northern and the
southern provinces (table 2).
Beginning in 1988, policy reforms were initiated to further liberal-
ize the agricultural sector of Vietnam. The latest reforms are aimed
at: (a) increased security of tenure on land allocated to individual
households; ( b )privatization of output markets; (c) decentralization of
input supplies; and (d) individual decision making for household re-

0 1992 by The University of Chicago. All rights reserved.

0013-0079192/4004-0044$01.oo
 TABLE 1

Growth in Growth in Growth in

Cultivated Yield per Total Rice
Area per Hectare per Production Population
Time Period Annum Annum per Annum Growth Rate

Vietnam (North and South):

1950-55 2.79
1956-65 .33*
1966-75 1.59
1976-81 1.14
1982-87 .08"
North Vietnam:
1950-55 77*

.-A

1956-65 .85

1966-75 - .24*

South Vietnam:
1950-55 5.63
1956-65 - .13"
1966-75 3.18

SOURCES.-Agricultural Statistics. Republic of Vietnam (Saigon. 1950-75): Agricul-

tural Statistics, Democratic Republic of Vietnam (Hanoi. 1950-75); Agricultural Statis-
tics. Government of Vietnam (Hanoi. 1975-86).
NOTE.-Ellipses indicate no data available.

" Growth rate is not significantly different from zero.

TABLE 2
RICEPRODUCTIVITY 1942-86
4 N D RICEAVAILABILITY:

NORTH SOUTH TOT~L

Yield per Per Capita Yield per Per Capita Yield per Per Capita
Hectare Rice Output Hectare Rice Output Hectare Rice Output
(tonslha) (kglyear) (tonslha) (kglyear) (tonslha) (kglyear)

SOURCES.-Figures from 1942-65 were taken from Tien Hung Nguyen, Economic
De~,elopmenr of Socialist Vietnam. 1955-80, Praeger Special Studies (New York:
Praeger. 1977). Figures for 1976-86 were taken from the Staristical Yearbook of Vietnam
(Hanoi. various years).
Prabhu L. Pingali and Vo-Tong Xuan 699

source allocation, crop choice, and crop management. These reforms

could move Vietnamese rice production from a contract system of
production to a relatively private system of production.
This article provides a historical overview of the process of collec-
tivization in northern Vietnam from 1955 to 1981 and in southern Viet-
nam from 1975 to 1981; an assessment of the policy changes that have
taken place since 1981; and an econometric estimate of the productiv-
ity impact of the change to the contract system from collective farming.
We have drawn on a variety of data and information sources, including
ordinances and resolutions issued by the government of Vietnam, dis-
cussions with Vietnamese policymakers and other knowledgeable indi-
viduals, field visits to Mekong Delta provinces, and an analysis of
provincial data over time.

11. The Process of Decollectivization in Vietnam

Vietnam recently introduced some dramatic policy reforms for liberal-
izing its agricultural sector. In order to understand the true magnitude
of these reforms it is useful to start with a historical perspective on
the process of the collectivization and decollectivization of Vietnam's
agriculture. While the former North Vietnam had a collectivized ag-
ricultural production system since the late 1950s, in the southern re-
gions of the country it was introduced only in the late 1 9 7 0 ~T. . ~ H.
Nguyen reports that by 1971, 96% of all farm families in the former
North Vietnam belonged to an agricultural cooperative. Table 3 indi-
cates that the number has remained about the same through 1986.
Attempts to collectivize the agriculture of the southern regions of Viet-
nam were not as successful; table 3 shows that three of the four south-
ern provinces had significantly lower levels of collectivization, with
less than 6% of the farmers organized into collectives in the Mekong
Delta provinces.
The level of collectivization also differed significantly between the
northern and southern provinces, the former having been organized
into cooperative farms and the latter into collective farms.4 In coopera-
tive farms, all farm work is carried out by production teams using
communally owned equipment, and payment is based on the quantity
and quality of work performed. In collective farms, production activi-
ties are mainly carried out on a family farm basis, and collective effort
is made only for obtaining inputs and for marketing outputs. The fol-
lowing is a brief historical overview of the process of collectivization
of agriculture in what was North and South Vietnam.5

Collectivized Agricultural Production in the Northern Provinces of

Vietnam: 1945-81
Collectivization of agricultural production in northern Vietnam started
with the implementation of a land reform and land redistribution pro-
Prabhu L. Pingali and Vo-Tong Xuan 70 1

gram. This was followed by a reorganization of agricultural production

away from individual ownership of resources and individual decision
making to collective ownership and management of production. The
following is a brief sketch of the agricultural transformation that took
place in northern Vietnam between 1945 and 1981.
During the French colonial era, generous land grants to French
settlers and to Vietnamese bureaucrats resulted in an extremely
skewed land distribution and in the creation of a large group of tenant
farmers and landless laborer^.^ In the densely populated Red River
Delta, 40% of the land was controlled by 2% of the rural population
in the late 1930s.' Both fixed rent and share tenancy were common in
northern Vietnam. Fixed land rents ranged from a third to half of a
normal harvest. Tenants had to pay the agreed upon amount even in
the case of a bad harvesL8 According to both P. Gourou and Y. Henry,
the most common rate in share cropping was half the crop to the
landlord.
Shortly after the August 1945 Communist revolution, agrarian re-
form was launched with the proclamation of an immediate reduction
of 25%-35% in all land rents to about one-third the gross yields9This
was followed by a land reform program carried out in several phases
between 1953 and 1957. During this period a thorough program of land
expropriation and redistribution was carried out by specially created
people's courts. Rural population was classified into "peasants" and
"landlords" based on land ownership and the number of days of farm
work performed per year. Land was then confiscated from the land-
lords and transferred to the peasants. By the end of this period, 810,000
hectares or 37% of the cultivable land in North Vietnam were distrib-
uted to 2,104,000 families, an average of 0.4 hectares per family.1°
However, land reform was only the first step in the new govern-
ment's strategy of communizing the rural sector. The plots of land that
the peasants had received were soon taken away through the process
of collectivization. The collectivization of agriculture included three
phases: the formation of work-exchange teams (1956-58); the estab-
lishment of low rank cooperatives (1958-60); and the advancement of
cooperatives from low rank to high rank (1960-72).
The work-exchange team arrangement allowed farmers to con-
tinue to own land and equipment, but integrated production was en-
couraged through participation in seasonal or permanent work teams.
Members of seasonal teams undertook collective work during peak
labor periods, such as planting or harvesting of rice. There was no
payment involved for participation in seasonal teams, since this was
considered mutual aid. A team may include a whole hamlet or several
families. The permanent team was an arrangement by which the farmer
continued to work on his own land but was a member of a year-round
team, such as the fertilizer team, spray team, mechanization team, and
702 Economic Development and Cultural Change

so on. Members of a permanent team were paid according to work

days or work points. By 1958, 86% of the peasant families were mem-
bers of work-exchange teams. However, only 13% of these families
belonged to a permanent team."
By 1958, the cooperative movement was initiated with work-
exchange teams, organized first into low rank cooperatives and later
consolidated into high rank cooperatives. In a low rank cooperative,
individual ownership of crop land, draft animals, and farm implements
was preserved. While all farm work was done in accordance with a
common plan of the cooperative, a member's share of output was
proportional to the amount of land, livestock, and farm machinery
contributed by him. Each member also received part of the gross yield
of the cooperative, according to his labor contribution to seasonal and
permanent work teams.
The high rank cooperative resembles the Soviet collective farm,
the Kolkhoz.12 This was an arrangement under which members pooled
their land and tools to work under a unified management. In a high
rank cooperative, land and other factor payments were eliminated and
output was shared solely on the basis of the amount of time spent
working in production teams. Each worker was assigned points for the
quantity and quality of work done each day. Payment at the end of
the season was based on the number of points accumulated.
The movement from work-exchange teams to low rank coopera-
tives was comparatively rapid; by 1960, 86% of the households with
68% of the cultivated land were registered under such cooperative^.'^
The conversion of these cooperatives to high rank took another 10
years. By 1971 there were 20,000 high rank cooperatives.14 The ad-
vancement from low rank to high rank cooperatives was associated
with declining productivity due to a payment structure that rewarded
quantity rather than quality of work. Since differences in quality of
work were costly to monitor and led to conflict among team members,
the point system quickly degenerated into a fixed point system for the
number of hours worked.'' With the degeneration of the work point
system to a fixed wage system, individual team members had an incen-
tive to shirk on their assigned responsibilities; hence, productivity de-
clined.16 Collectivization of agricultural production in northern Viet-
nam suffered the fate of similar systems in other socialist countries,
such as China and the Eastern Bloc countries."

Collectivization Efforts in Southern Vietnam, 1975-81

The experience of the southern provinces of Vietnam with collectiviza-
tion was different from that of the northern provinces and accounts at
least partially for the south's superior performance in production and
productivity (as discussed later). The difference is attributable to the
following factors: ( a ) the completion of land reform prior to reunifica-
Prabhu L. Pingali and Vo-Tong Xuan 703

tion in 1975; ( 6 ) the widespread adoption of modern rice technology;

and (c) the existence of a flourishing private enterprise economy up
until 1975.
A series of land reform measures implemented between 1956 and
1974 allowed South Vietnam to overcome successfully the problems
of skewed land distribution and high land rents. By 1955, the end of
the French period in Vietnam, about 40% of the rice land areas in
South Vietnam were held by some 2,500 individuals-0.25% of the
rural population. Many large owners were French. Rent rates were
commonly 50% of the crop or more, and tenure security was nonexis-
tent.18 A rent control and land ownership ceiling program was imple-
mented in 1956, and a land redistribution and titling program was im-
plemented in 1970.19The latter program, generally referred to as "the
land to the tiller program," enabled the redistribution of 1.3 million
hectares of agricultural land to over 1 million farmers, an average of
1.3 hectares per farmer. This program, completed by the end of 1974,
compares favorably with the land reform program in the north, where
810,000 hectares were redistributed to 2.1 million farmers by the end
of 1957, an average of 0.4 hectares per farmer.20
Rice production in southern Vietnam increased substantially dur-
ing the decades 1955-65 and 1966-75 (tables 1 and 2). Increase in the
first of these decades could be attributed to yield increases in both the
irrigated and the flood prone areas of the Mekong Delta. In the irrigated
areas, a doubling of rice yields was achieved by switching from a
cropping system of one rice crop per year of 6-8 months' duration to
a system of two consecutive rice crops per year of 4 months' duration
each.21In the flood prone areas, which account for 1.5 million hectares
of rice lands in the Mekong Delta, the introduction of Cambodian deep
water and floating rice varieties in the late 1940s and 1950s resulted in
a 15%-20% yield increase.22
In the decade of 1966-75 rice output growth was achieved through
both an expansion in cultivated land and an increase in yields per
hectare (table 1). Completion of the land reform and land redistribution
program allowed small farmers to bring back into cultivation land aban-
doned by landlords during the war. Rehabilitation of irrigation infra-
structure during this decade also contributed to the expansion in culti-
vated area.23The growth in yield per hectare during this period can be
attributed to the rapid adoption of modern high yielding rice varieties,
especially in the Mekong Delta. The area with high yielding rice variet-
ies grew from 500 hectares in 1967 to approximately one million hect-
ares in 1975.'4 The widespread adoption of modern seed-fertilizer tech-
nology allowed farmers to grow two rice crops per year in the irrigated
lowlands and to obtain higher yields per crop relative to traditional rice
varieties. Yields rose from 1.5 metric tons per hectare for traditional
varieties to 4-5 metric tons per hectare per crop for modern varieties.
704 Economic Development and Cultural Change

Until 1975 southern Vietnam was a private enterprise economy.

Even 2-3 years after reunification, the Mekong Delta farmers were
allowed to operate under a relatively free system. In 1976, the fourth
National Convention of the Communist party adopted resolution num-
ber 4, which urged all party leaders in the provinces of southern Viet-
nam to move gradually toward collectivization. It stated that by 1980
most rice areas ought to be collectivized. The Central Coastal prov-
inces and the Western Plateau provinces moved very rapidly toward
collectivization: 90% and 52% of the farmers in each of these regions,
respectively, joined the cooperatives (table 3). Collectivization in these
regions was seen as a means of rebuilding their agriculture after the
war. Farmers in the Mekong Delta provinces, however, resisted efforts
at collectivization. Even in 1986, less than 6% of the Mekong Delta
farmers belonged to an agricultural cooperative (table 3). Those that
did could be classified as low rank cooperatives or collectives, as dis-
cussed above.
This does not mean that collectivization efforts did not affect the
Mekong Delta farmers. Land was further redistributed and farmers'
were organized into production groups. Households were assigned
land, as follows: each adult was given 0.1-0.15 hectares of land; each
child under 16 years old and adults over 60 were assigned 0.08-0.1
hectares of land. Differences in land allocations per head were based
on differences in land quality and irrigation water access. There was
no long-term security of tenure on the assigned land, and it could
be reallocated at the will of the management of the collective. Such
reassignments were common and impeded land investments for sus-
taining the productivity of the land.
Unlike in the north, however, agriculture in the south continued
on a family farm basis despite collectivization. Farmers continued to
be the primary decision makers for all input and technology decisions
on their assigned land, although sharing of labor and production re-
sources became more common. Sharing of labor became especially
important for power-intensive operations such as land preparation and
threshing, since individual ownership of tractors, tillers, threshers,
pumps, and draft animals was abolished. All such capital assets had
to be sold to the province at an assessed value that was substantially
lower than the market value of the assets. This equipment was then
distributed to the cooperatives or districts for use in equipment pools.
The net result was a sharp decline in draft power supply in most of
the Mekong Delta provinces. Figure 1 shows draft power shortage by
province in 1985. All but two of the southern provinces had draft
power shortages while only two of the northern provinces exhibited
similar draft power shortages. Toward the late 1970s, input supplies
to the Mekong Delta provinces declined because they were being as-
 SEA

KAMPUCHEA

Draft power shortage

FIG.1 .-Provinces with draft animal shortages under existing paddy land
706 Economic Development and Cultural Change

signed on a priority basis to farmers who were organized into coopera-

tives.
A comparison of per capita rice output from 1942 to 1986 reveals
the depressed state of rice production in Vietnam (table 2). During this
45-year period, rice output per capita in the northern regions remained
stagnant at around 200 kilograms (unmilled rice). In the southern prov-
inces there was a steady decline in per capita rice output during the
same time period. Output per capita was around 420 kilograms of
paddy in 1942 and is currently around 330 kilograms. During the period
immediately following reunification (1976-81), rice output per capita
was around 270-90 kilograms. At the national level rice output per
capita had been stagnant during this period at 260-80 kilograms, with
the lowest levels during the 1965-80 period.25A comparison with the
Philippines and Indonesia is illustrative. Rice is also the staple food in
both of these countries, and their agroclimatic conditions are similar
to Vietnam. Between 1950 and 1986, per capita rice output rose by
33 kilograms and 110 kilograms, respectively, for the Philippines and
Ind~nesia.'~
The growth rate of aggregate rice output was at its lowest level
during the 1976-8 1 period (table 1) primarily because of a sharp decline
in production in the southern provinces. During the years immediately
preceding reunification, the southern provinces were producing around
7 million tons of paddy per year. For the years immediately after reuni-
fication, southern rice output dropped to around 6 million tons, re-
turning to 7 million tons only toward 1980. This drop in rice output
in the southern provinces during the 1976-81 period can be directly
attributable to uncertainty caused by the attempted collectivization
and "socialist transformation" of southern agriculture.

Recent Policy Reform: The Contract Systern

Faced with rising food deficits and growing farmer unrest, the Central
Politburo of the Communist party issued a directive in 1981 that intro-
duced the contract system to Vietnam (Directive 100 CT, April 1981).
As per this directive, all farmers enter into a contract with the coopera-
tive to produce a certain level of output on their land. The cooperative
would furnish each farmer adequate inputs for achieving that output
level. While production teams were expected to continue to provide
land preparation, irrigation, and input distribution services on all
farms, each farmer was responsible for crop management and hus-
bandry on his own land. The contracted output had to be sold to the
state at a fixed price. All output beyond the contracted amount could
be kept for home consumption or sold to private traders. Conceptually
the introduction of the contract system is equivalent to a switch from a
fixed wage to a fixed rent system of production. The tenancy literature
Prabhu L. Pingali and Vo-Tong Xuan 707

provides substantial theoretical and empirical evidence on the effi-

ciency gains attributable to this switch."
The introduction of the contract system had a significant impact
on food output growth between 1981 and 1987 and then began to level
off. Aggregate rice output grew annually at the rate of 2.8% during
1982-87 as compared with 1.9% for the 1976-81 period (table 1). Most
of the output growth can be attributed to an increase in yields per
hectare per crop rather than an expansion in area cultivated (table 1).
In the southern provinces aggregate rice output grew by over 2.5 mil-
lion tons from 1980 to 1987. The corresponding increase in the northern
provinces was around 2 million tons for the same time period.
The success of the contract system could not be sustained over
the long term due to the following reasons: (a) land use and crop choice
decisions were still done by the State Planning Commission in the
traditional top-down approach, without consideration of farmer prefer-
ences and local market conditions; (b) the government often failed to
procure all the grain it had contracted to procure at harvest time due
to financial difficulties; (c) as a consequence of b, seasonal surpluses
at the farm gate led to a crash in the private rice price in several
regions, which-while benefiting the urban poor-had severe incen-
tive effects on farmers; ( d ) the persistence of centralized input supplies
resulted in inadequate and untimely provision of inputs to farmers; and
(e) lack of security of land tenure resulted in inadequate farm-level
investments for maintaining long-term land productivity.

Correcting the Shortcomings: The Latest Reforms

Land allocation. Until 1988, land assignments to individual
farmers were carried out by local party officials and the local agricul-
tural officer. Favoritism in allocation of the best quality land was inevi-
table in such a system. Moreover, since the farmer had no long-term
right to a particular piece of land he could be reassigned at will by the
agricultural officer. Such reassignments were particularly common for
farmers who invested in land development. This frequent reassignment
of land resulted in underinvestment in maintaining land productivity.
In 1988, the Central Committee of the Communist party passed resolu-
tion number 10, which assigned land to the tiller for lo-, 1 5 , and
20-year terms on the basis of renewable leases. The assignment of land
is to the family rather than the individual, implying that bequests of
land are possible within the family. The farmer cannot be displaced
from his land without his consent and without fair compensation for
the cost of land development. Moreover, resolution number 10 indi-
cated that farmers are entitled to be assigned the land they owned prior
to 1975. The last two clauses in resolution number 10 have led to
substantial conflicts on land assignments among farmers and between
708 Econornic Development and Cultural Change

farmers and former landlords. The Economist Intelligence Unit Re-

ports for 1988 and 1989 document these conflicts. This conflict was
subsequently resolved by an ordinance that stated that land confiscated
from landlords either during the war or after the war cannot be re-
turned to them (ordinance 13, of the Council of Ministers, February
1, 1989).
Privatization of o~ctputmarkets and introduction of the land tax.
As of 1989, farmers no longer are required to sell a contracted amount
of rice to the state. Ordinance number 170, issued by the Council of
Ministers on November 14, 1988, states that the individual family will
have the right to own all products generated by it after subtracting
taxes and other commissions to the board of collectives. Farmers are
required to pay tax in food grain based on the assessed value of their
land. There are seven land categories based on soil acidity, elevation,
and irrigation access. The tax is fixed for each land category and can
range from 0 to 750 kilograms of grain per hectare per year.
Private traders now have equal rights to the state in the purchase
of food grains from the farmers (ordinance number 193, issued on
December 23, 1988). Subsidized sale of food grain to government em-
ployees and to the army, which was the primary reason for government
food grain purchase, is also being discontinued (ordinance number 169,
November 14, 1988). This has resulted in an equalization of food grain
prices in the government supply stores and the private market.
Decentralization of input supplies. Since 1960 in the north and
since 1976 in the south, retail trade in agricultural inputs has been
controlled by the State Trading Corporation and by buying and selling
cooperatives. Input allocations to the provinces were made on the
basis of the National Land Use Plans, which determined the crops to
be grown in each region. The provincial allocations were then distrib-
uted to the cooperatives, which then distributed them to the various
production teams. This top-down system of input supply resulted in
high administrative overhead, which was added on to the cost of in-
puts, and in untimely delivery of input supplies. The total supply of
inputs was never enough to meet all requirements, and hence there
was constant competition and conflict among the various groups for
input access.
In the Mekong Delta provinces, where collectivization efforts
were not successful, this system of input supply did not apply to most
farmers. Given the high demand for fertilizers and chemical inputs in
the area, a private market for inputs soon developed. Input supplies
would be diverted to private traders from provincial or cooperative
sources, and these would then be sold to farmers. Table 4 presents the
incidence of private fertilizer and pesticide sale in the five Mekong
Delta provinces visited in December 1988. Farmers interviewed in four
of the five provinces reported a well-established private market for
 TABLE 4
RURALFACTOR
MARKETS
IN THE MEKONG
DELTA:DECEMBER
1988

Rental Markets
for Carabao Fertilizer and Farm
ProvinceIDistrict or Tractor Pesticides Labor Market Land Tax

Long An Province 40 kg of paddylday or Private traders; urea: 610 Harvesting sugarcane: Cate,gory C: 35 kgi1,OOO
10,000 dong donglkg 3,500 dongiday; trans- m-
planting rice: 2.000
donglday
Tien Giang 30 kg of paddyil.OOO m' From private traders; 600 Land preparation: Category A: 70 kg1 1,000
donglkg of urea 3,000-4,000 dongiday ; m2
-.
I transplanting: 2,000
o donglday
Hau Giang 12,000 donglday or 20 kg Bought from private trad- Land preparation: 3,000 Category A: 70 kgl1.000
of paddy1 1,000 m2 ers this season; urea: dongiday; off-farm m2; Category E: 21 kg1
650 donglkg work: digging canals, 1,000 rn2
etc., 2,000-3,000 dong1
day
An Giang 20 kg of paddy11,OOO m2 Private traders since this Harvesting paddy: 20 kg Cate,gory C: 42 kg/1,000
year; urea: 600 donglkg paddyi1.300 m' m*
Kien Giang Tractor rental: 300 kg No private source Weeding: 10 kg paddy1 ...
paddylday day; harvest: 200 kg
paddylha; wage per day:
25,000 dong

SOURCE.-Information collected through group interviews of farmers in each of the above provinces during a field visit conducted in December
1988.
NOTE.-Ellipses indicate no data available.
710 Economic Development and Cultural Change

fertilizers and pesticides. The similarity of the urea price across the
four provinces supports the perception that the private traders have a
Delta-wide network.
These farmers also reported a well-established market for hired
carabao plowing and hired labor for transplanting, weeding, harvest-
ing, and land preparation (table 4). Seasonal migration of hired labor
and carabao has led to the equalization of carabao rental rates and
wage rates across provinces in the Mekong Delta. While seasonal mi-
gration to other rural areas and cities is allowed, permanent migration
in search of land or employment is not.
Since the latter half of 1988, input supplies are being handled
by the provincial authorities rather than the central government. This
includes imports of inputs also. Several Mekong Delta provinces have
started importing urea and Di Ammonium Phosphate (DAP) using their
own export earnings (through the sale of shrimp, etc.) or through trade
between a state parastatal and a foreign company. Farmers with finan-
cial resources are also allowed to own mechanical equipment and draft
animals. Ordinance number 193, issued on December 23, 1988, indi-
cates that individual traders can also handle input marketing; however,
input imports still have to be done by the state export-import agency,
and foreign exchange allocations are still highly controlled by the state.

111. Productivity Impact of Vietnam's Policy Reforms

The objective of this section is to estimate empirically the productivity
impact of Vietnam's policy reforms in rice production. The reforms
specifically examined are the movement from collective agricultural
production to the contract system introduced in 1981. Separate produc-
tion functions were fit for the northern and southern provinces in order
to capture the differential effects of policy reform in the former North
and former South Vietnam. A data set consisting of provincial data for
the years 1976, 1980, and 1985 was used in this analysis." Table 5
represents selected statistics from this data set. A variant of the Cobb-
Douglas production function presented below was used. This function
is similar to the one used by J . Y. Lin for China."
= (ui + ~ I ; Z I ) (u?+a!;Zi) X 3 ( ~ 3 - u j : Z i )
x2
exp ( P I Z l + PzZz + P3Z3+ 0,TI + a 2 T 2+ yiRi).

Total rice output per province per year (q) is related to production
inputs, provincial characteristics, time, and regional dummies. Produc-
tion inputs considered are: total rice cultivated area by province (x,);
rural population by province (xz),used as a proxy for agricultural labor
force; and buffalo population by province (x,), used as a proxy for
draft animal power. Provincial characteristics are: proportion of rice
Prabhu L. Pingali and Vo-Tong Xuan

TABLE 5
SELECTED
RICESTATISTICS
FOR NORTHERN
A N D SOUTHERN
VIETNAM

North South
Vietnam Vietnam

Rice production (thousands of tons):

1976
1980
1985
Cultivated area (thousands of ha):
1976
1980
1985
Rural population (thousands):
1976
1980
1985
% area under MVs:
1976
1980
1985
% irrigated area:
1976
1980
1985
% farmers in cooperatives:
1985
Number of provinces

area under modern varieties (Z,); proportion of rice area irrigated (Z,);
and proportion of farmers who are members of cooperatives (Z,).
This specification of the production function allows output elastic-
ities to vary linearly with the ratio of modern variety area to total rice
area (Z,). In Vietnam, modern rice varieties are grown under both
irrigated and rain-fed conditions but only in areas where good water
control is possible. The interaction term will therefore capture produc-
tivity differences due to differences in land quality, as well as the
impact of modern varieties per se.
Year dummies were used for 1980 (TI) and 1985 ( T , ) . The year
1976 was used as the base year for comparison. The year dummies
measure the impact of two distinct policy regimes. During the 1976-81
time period, there was a concerted effort by the Vietnamese govern-
ment to collectivize all agricultural production in the country, while
during the 1981-87 time period policies for liberalizing agricultural
production were promoted through the contract system. All 3 years
were normal weather years and did not experience any unusual devia-
tions in rainfall or temperature patterns. The year dummies were there-
fore designed to capture the impact of the collectivization and decollec-
712 Economic Development and Cultural Change

tivization policies that are not captured by the ratio of cooperative

farmers. The percentage change in output for years 1980 and 1985
relative to the base year 1976 is measured by [exp (0,)- 11 and [exp
(64) - I], r e s p e ~ t i v e l y . ~ ~
Regional differences in production due to regional agro-climatic
and infrastructural differences are captured by the regional dummies.
The northern provinces are divided into three regions: the Northern
Uplands; the Red River Delta (R,) and the former fourth region (Rz).
The southern provinces are divided into four regions: the Central
Coastal region; the Western Plateau ( R , ) ;the Southeastern region (Rz);
and the Mekong Delta (R,). The primary rice-producing region in the
north is the Red River Delta (regional dummy 2) and in the south it
is the Mekong Delta (regional dummy 4). The Northern Uplands and
the Central Coastal region were used as base regions for comparison
for the north and south, respectively. The percentage difference in
output for region (R,) relative to the base region is measured by [exp
(y,) - I].,'
Regression results are presented separately for the north and the
south in table 6. The primary result of this analysis is the significant
negative impact of collectivization on productivity in rice production.
This was evaluated from the coefficient on the ratio of cooperative
farms and the coefficients on the time dummies for the years 1980 and
1985. For the northern provinces all three of these coefficients are
highly significant and have the expected signs. For the southern prov-
inces the coefficient on the ratio of cooperative farms to all farms was
not significant while the two time dummies were highly significant and
had the expected signs.
The productivity difference between cooperative and noncoopera-
tive farmers is measured by [exp ((3,) - When evaluated for the
northern provinces, it leads us to conclude that cooperative farmers
had a 52% lower productivity than noncooperative farmers. The ratio
of cooperative to total farmers in the northern provinces was 0.93;
hence collectivization accounted for a total productivity decline of
around 48%. Productivity decline by almost 50% seems rather high
and can be explained as follows. The cooperative variable is not only
capturing the disincentives to work but also some of the uncertainties
associated with centralized input supply. If fertilizers and other input
had been included in the model the magnitude of the coefficient on
cooperatives may have been lower. Such data were, however, not
available.
The coefficient on cooperative farmers was not significant for the
southern provinces. This can be explained as follows: less than 30%
of all southern farmers belong to cooperatives; in the major rice pro-
ducing provinces of the south, the Mekong Delta provinces, coopera-
tive farmers account for less than 5% of all farmers. The cooperative
Prabhu L. Pingali and Vo-Tong Xuan

TABLE 6

North South

Intercept - .7466
(.4556)
Log of area (XI) .9702**
(.0723)
Proportion of area under MV
x log (area)
Log of rural population (XJ

Proportion of area under MV

x log of rural population
Log of no, of buffaloes (X3)

Proportion of area under MV

x log of no. of buffaloes
Proportion of area under MV (ZI)

Proportion of area
under irrigation (Zz)

Proportion of farmers with

membership in cooperatives (Z,)

Dummy for year 1980 ( T , )

Dummy for year 1985 (Tz)

Regional dummy 1

Regional dummy 2

Regional dummy 3

~~(5%)
Degrees of freedom

* Significant at 5% level.
** Significant at 1% level.

movement was more successful in the less productive, upland rice-

production areas of the Central Coastal and Western Plateau regions
of the south. Even in these regions collectivization became established
only toward the end of the 1970s. In 1976 there were almost no cooper-
atives in the south, and most of the existing cooperatives were formed
around 1978-80. Also, because the contract system was introduced in
1981, these cooperatives did not have the chance to grow into full-
714 Econornic Development and Cultural Change

fledged collectives as in the north-hence the insignificant effect of

cooperatives on total rice output.
The year dummy for 1980 had a significant negative effect on
rice output for the northern provinces. Rice output was lower by 13%
relative to the 1976 level. The productivity decline during the 1976-80
period can be attributed to the high degree of centralized control of
rice production in the north. As discussed in the last section, crop
choice, input supplies, and output marketing were centralized. This
result is consistent with the data on output growth for the time period
1976-81, presented in table 1. The year dummy for 1980 was not sig-
nificant in the south, although it had the expected negative sign. There
are two reasons for the relative stability of southern agriculture during
this period: southern farmers had inputs and equipment left over from
before the reunification period; and centralization and collectivization
efforts were not made in earnest until almost the end of the 1970s.
The time dummy for 1985 was significantly positive for both the
northern and the southern provinces. Relative to 1976, rice output was
higher in 1985 by 11.8% and 16.25% for the northern and the southern
provinces, respectively. Once again, these results are consistent with
the figures on output growth for the 1981-87 time period presented in
table 1. As discussed in the previous section, the contract system of
production was introduced at the end of 1981, whereby individual ef-
fort was rewarded by incremental output that the farmer could keep
or sell. The productivity gain between the two time periods across the
northern and the southern regions can be attributed, at least partially,
to this decollectivization policy. The productivity gain attributable to
the contract system in Vietnam is similar to the amount estimated by
Lin for China: "Between 1980 and 1983, 83.5410 of the total co-opera-
tive teams in China were transformed to the household farms. This
institutional change thus implied a 16.4% productivity jump between
1980 and 1983.""
Our results show significant regional rice productivity differences
for both the northern and the southern provinces. In the north, the
Red River Delta farmers (region 2) were 18% more productive, and
the former fourth region farmers (region 3) were 18% less productive
than the farmers in the Northern Uplands (region 1). In the south, the
Mekong Delta farmers (region 4) were 22% more productive than the
farmers in the Central Coastal region (1); Western Plateau (region 2);
and the Southeastern region (3).

IV. Conclusions: Beyond the Current Policy Reform

Despite the productivity gains brought about by the introduction of
the contract system of production in 1981, rice output growth has not
kept pace with population growth. Rice yields in Vietnam are below
yields in other southeast Asian countries with similar agro-climatic
Prabhu L. Pingali and Vo-Tong Xuan 715

conditions and land endowments. Low rice productivity can be ex-

plained partly by insufficient policy reform and partly by inadequate
infrastructural investments, especially for irrigation, soil conservation,
transport, and research.34
Section I1 described the policy bottlenecks that contributed to the
leveling off of the productivity gains due to the contract system. The
most recent policy reforms implemented in 1989 were designed to over-
come many of the shortcomings described above. Reforms are still
needed in the following areas: (1) Land use planning and crop target
setting are still done by the central government-this implies that crop
choice decisions are still made by provincial and cooperative officials
rather than the farmers. (2) While input marketing has been privatized,
input imports, output exports, and foreign exchange allocations are
still controlled by the state-this implies high domestic input prices
(especially for fertilizers) and low output prices (e.g., rice in the Me-
kong Delta). (3) While the latest reforms indicate that individual owner-
ship of production assets such as power tillers, water buffaloes, and
so on is possible, there is no established means for obtaining finances
for purchasing this equipment. Policies for encouraging the emergence
of formal and informal credit markets for short- and long-term loans
would help farmers accumulate production assets. (4) Regional short-
ages and surpluses in seasonal labor markets continue to exist because
farmers are as yet not allowed to hire in or hire out labor; given the
shortage of draft power, this policy tends to have a negative effect on
output growth. ( 5 ) Finally, the current policy restricting the leasing in
and leasing out of land tends to constrain efforts toward consolidation
of holdings or choosing among lands of different qualities or expanding
the scale of operation.
While this article has shown the tremendous productivity impact
of policy reforms, we ought to emphasize that policy reforms alone
will not lead to sustained growth in agricultural output. These reforms
have to be accompanied by investments in irrigation, water control,
transport, and soil conservation. Irrigation and water control invest-
ments in Vietnam during the war and since have been extremely inade-
quate. In the Mekong Delta, for instance, the current system of drain-
age and irrigation canals was built by the French between 1880 and
1930. By 1930 this system allowed the cultivation of 2.4 million hect-
ares, which is nearly equal the area cultivated today.35 The story is
the same for the northern provinces: state investment in irrigation was
less than 7% of total budgetary allocations up until the end of the
war.36The severe foreign exchange crisis in recent years has prevented
the government from maintaining, let alone increasing, investments in
irrigation. As a consequence, irrigation and water control infrastruc-
ture throughout the country is in severe disrepair, and rehabilitating
the existing infrastructure ought to be a top priority.
716 Economic Development and Cultural Change

The same is true of road infrastructure, which has been in disre-

pair since the war. The roads in the northern and central parts of the
country are particularly bad and are often impassable. As a conse-
quence, excessive transport costs prevent the movement of rice from
the traditionally surplus southern provinces to the traditionally deficit
northern provinces. Also the movement of rock phosphate from the
mines in the north to the highly acidic soils of the south, where it is
needed, is impeded.
Rapid population growth and the lack of security of land tenure
have contributed to the lack of farm-level investment in sustaining the
productivity of the soil. The problem is most acute in the sloping-hill
soils in central and northern Vietnam. Almost a million hectares of
such land is currently in use, and without adequate erosion control
and fertility management investments, these soils face declining pro-
du~tivity.~'The immediate promotion of sloping-land conservation
technologies in these environments is a priority. Erosion control ef-
forts, in addition to requiring high levels of investment, will also need
collective action by the affected farmers. Given the negative impact
of the recent collectivization attempts, organizing such group efforts
may not be easy.
Since the beginning of the war years until the present, investment
in agricultural research has been very low. Budgetary constraints made
it infeasible to set up a long-term research program in basic or adaptive
agricultural research. In the case of rice, Vietnam continued to obtain
modern high yielding cultivars from the International Rice Research
Institute, from rice research programs in other Asian countries, and
from its own breeding program.38 These were then released as Viet-
namese rice varieties after screening them for local adaptability. How-
ever, Vietnam faces some unique biophysical constraints to increasing
rice productivity that cannot be alleviated by imported cultivars. In
the Red River Delta the primary constraint is low temperatures and
blast problems. In the Mekong Delta, the prevalence of acid-sulphate
soils and saline soils constrain the use of imported cultivars. The Me-
kong Delta is also affected by high pest infestations, especially sheath
blight and blast. Primary and adaptive research for cultivar develop-
ment and for crop and land management is required in order to improve
and sustain yields despite these constraints.

Notes
* Ludy Velasco's research assistance is highly appreciated. Kejiro Ot-
suka provided insightful comments on a preliminary draft. This research was
partially supported by a grant from the Government of Australia.
1. Dana G . Dalrymple, "Development and Spread of High-Yielding Rice
Varieties in Developing Countries" (Bureau of Science and Technology,
Agency for International Development, Washington, D.C., 1986); Vo-Tong
Prabhu L. Pingali and Vo-Tong Xuan 717

Xuan, "Rice Cultivation in Mekong Delta," South East Asian Studies 13,
no. 1 (June 1975):88-1 1 1 .
2. Justin Y i f u Lin, "The Household Responsibility System in China's
Agricultural Reform: A Theoretical and Empirical Study ," Economic Develop-
ment and Cultural Change 36, no. 3 (April 1988): 199-224.
3. Tien Hung Nguyen, Economic Development of Socialist Vietnam,
1955-80, Praeger Special Studies (New York: Praeger, 1977).
4. Csaba Csaki, "The Agricultural System and Agricultural Policy in Viet-
nam," Consultant's Report no. VIE1881033 (Rome: Food and Agriculture Or-
ganization, 1989).
5. For a more detailed account o f the agrarian reforms in the Vietnams,
see Nguyen; Adam Fforde, "Coping with the State: Peasant Strategies in
North Vietnam," Discussion Paper no. 155 (University of London, Birkbeck
College, October 1984);Charles S. Callison, Land-to-the Tiller in the Mekong
Delta: Economic, Social and Political Effects of Land Reform in Four Villages
of South Vietnam (Lanham, Md.: University Press o f America, 1983);H. H.
Smith, D. W . Bernier, F . M. Bunge, F. C. Rintz, R. S. Shinn, and S. Teleki,
"Area Handbook for South Vietnam" (American University, Washington,
D.C., 1967); H. H. Smith, D. W . Bernier, F. M. Bunge, F . C. Rintz, R. S.
Shinn, and S. Teleki, "Area Handbook for North Vietnam" (American Uni-
versity, Washington, D.C., 1967); Harold D. Koone and Lewis E. Gleeck,
"Land Reform in the Philippines," USAID Spring Review Land Reform 4,
no. 2 (1970):1-93.
6. Yves Henry, "Economie agricole de I'Indochine" (Agricultural eco-
nomics o f Indochina) (Government o f Indochina, General Inspection o f Plant
and Animal Agriculture and Forestry, Hanoi, 1932);P. Gourou, L' utilization
du sol en Indochine Franqaise (Land utilization in French Indochina) (Paris:
Hartmann, 1940), also available in mimeographed form (Institute o f Pacific
Relations, New York, 1945).
7 . Nguyen.
8. Gourou.
9. J . Price Gittinger, "Communist Land Policy in North Vietnam," Far
Eastern Survey, vol. 28, no. 8 (1959).
10. Nguyen.
1 1. Gittinger.
12. Smith et al.
13. Fforde.
14. Nguyen (n. 3 above).
15. See Fforde (n. 5 above) for evidence from a sample o f cooperatives.
16. A theoretical case for this outcome o f team work where quality differ-
ences are not rewarded was made by Armen Alchian and Harold Demsetz,
"Production, Information Costs, and Economic Organization," American
Economic re vie^^ 62, no. 5 (1972):777-95.
17. See, e.g., Lin (n. 2 above); Kathleen Hartford, "Socialist Countries
in the World Food System: The Soviet Union, Hungary and China," World
Food System (1987),p p . 181-243; Andrew Watson, "Agricultural Looks for
'Shoes That Fit': The Production Responsibility System and Its Implications,"
World Development, vol. 1 1 , no. 8 (1983);and Walter Oi and Elizabeth Clay-
ton, " A Peasant's View o f a Soviet Collective Farm," American Economic
Review 58, no. 1 (1968):37-59.
18. Gittinger (n. 9 above).
19. For details on these programs, see Callison (n. 5 above).
20. Nguyen.
 718 Economic Development and Cultural Change

21. Xuan (n. 1 above).

22. Vo-Tong Xuan and D. G . Kanter, "Deep Water Rice in Vietnam:
Current Practices and Prospects for Improvement" (paper presented at the
International Seminar on Deep Water Rice, Bangladesh Rice Research Insti-
tute, Dacca, August 1974).
23. Smith et al., "Area Handbook for North Vietnam" ( n . 5 above).
24. Dalrymple ( n . 1 above).
25. Yield data over time.
26. International Rice Research Institute (IRRI), "World Rice Statistics,
1987" (IRRI, Los Banos, 1988).
27. See Yujiro Hayami and Keijiro Otsuka, "Theories o f Share Tenancy:
A Critical Survey," Economic Development and Cultural Change 37, no. 1
(1988):31-68, for a review and synthesis o f this literature.
28. These were the only years for which provincial data were available
for each o f the variables in the production function.
29. Lin ( n . 2 above).
30. The percentage change in output between 1980 and 1976 is given as
follows:

qL9g0- q]976-
-
f(x, z , R ) [exp ( 0 ,- T I :1980) - exp ( 0 ,T , :1976)]
9 1976 f(x,z , R ) exp ( 0 ,T I :1976)

The dummy variable T, has the value 1 for 1980 and 0 for 1976; therefore, the
above becomes

91980 - q1976 -
- [exp ( 0 , )- 11.
91976
Calculations are done similarly for percentage change in output between 1985
and 1976. The percentage difference in output for region ( R , ) relative to the
base region can be similarly derived.
31. S e e n . 1.
32. The productivity impact o f membership in cooperatives is measured
by f ( x . Z I , z l , R , T ) exp ( P 3 Z 3 ) ,where Z3 is the proportion o f farmers in
cooperatives. I f all farmers in a province belong to cooperatives, Z3 = 1, and
if none belongs, Z3 = 0 . The total productivity impact would therefore be [exp
(PJ - 11 x z3.
33. Lin.
34. Vo-Tong Xuan and Prabhu L. Pingali, "Priorities for Rice Research
in Vietnam," Social Science Division Paper no. 91-05 (IRRI, Los Baiios, 1991).
35. Gouvernement General de I'Indochine, Dragages de Conchinchine
(dredging in Cochin-China), "Canal Rachgia-Hatien" (Rachgia-Hatien chan-
nel) (Inspection Generale Destravaux Publics, Saigon, 1930).
36. Nguyen ( n . 3 above).
37. That Chieu Ton, "On Land Use Planning (in Vietnam)" (National
Institute o f Agricultural Planning, Hanoi, 1989).
38. International Rice Testing Program, "Annual Reports, Various Is-
sues" (IRRI, Los Banos).

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