Optimal Rice Land Protection in a Command Economy

Abstract

Agricultural land protection (ALP) is a standard policy response to growing food security concerns driven by urbanisation, population growth and uncertainty over climate change. However, if not supported by rigorous analysis, at least in terms of the correct scale of protection, ALP may result in a misallocation of resources, hampering economic efficiency and prosperity. Examining rice land policy in Vietnam, this paper aims to determine the optimal level of rice land protected against other crops and evaluates the impact of adopting the optimal policy. With a stochastic optimization model built on top of a computable general equilibrium framework and microsimulation techniques, applied to Vietnam's social accounting matrix and household survey data, we find that converting part of protected rice land into other crops enhances economic efficiency. While the efficiency gain could amount to billions of dollars, income inequality only improves slightly. Overall, the policy is relatively pro-rich, implying a trade-off between poverty reduction and economic efficiency for Vietnam, making some households in already poor areas worse off. Though calibrated to a specific case, our approach can be applied in land-use planning generally, highlighting the relevant tradeoffs and the search for needed optimal land-use policies.

Innovation, agricultural productivity and sustainability in Viet Nam

“…In recent years, the government has implemented a range of institutional changes to reduce corruption, including enhancing transparency and civil service reforms to encourage accountability (Malesky, Ngoc and Thach, 2018 [31]). Reflecting these efforts, annual surveys of both private enterprises and Vietnamese citizens report improvements across a range of governance areas, including perceptions and experiences of corruption, the quality and efficiency of administrative procedures, and the provision of basic public and business services (Malesky, Ngoc and Thach, 2018 [31]; Malesky, 2017 [32]; CECODES et al, 2019 [33]).…”

“…Despite the aforementioned improvements, corruption continues to be highly problematic for doing business in Viet Nam (WEF, 2017 [37]; Maruichi and Abe, 2019 [38]). Land administration, particularly access to land-related information and the process of certifying land use rights, is considered one of the more corrupt aspects of public administration (CECODES et al, 2019 [33]; OECD, 2015 [2]). Viet Nam has taken steps to strengthen property rights, but major issues remain, particularly related to how land-use rights are allocated and enforced, and businesses also report concerns over the security of land tenure (World Bank, 2016 [5]).…”

“…A number of agricultural products and inputs are VAT exempt, including: unprocessed crop, livestock and aquaculture products; products that have undergone preliminary processing by organisations or individuals selfproducing and selling such products; and products at the stage of importation. 33 Most exported agricultural products are VAT exempt. Since 2014, fertilisers, certain types of specialised machinery and equipment serving agricultural production, and certain types of feed for cattle, poultry, and other animals have also been exempt; previously, a 5% VAT rate applied to these goods.…”

“…Forty-four agencies conduct agricultural research in Viet Nam (excluding the private for-profit sector) (Stads, 2020[104]). More than 75% of researchers are employed within 33 (Stads, 2020[104]). Thai Binh Seed has state-of-the-art research facilities and seed-processing infrastructure.…”