Upland Agriculture in Asia

Transcription

1 CGPRT NO. 30 Upland Agriculture in Asia Proceedings of a Workshop Held in Bogor, Indonesia April 6-8, 1993

2 Welcome Address Seiji Shindo * Distinguished participants, ladies and gentlemen: I heartily welcome all of you to this seminar entitled Upland Agriculture in Asia. I particularly appreciate the attendance of senior researchers who accepted the invitation to the seminar in spite of tight schedules. I am also grateful to meet many country representatives who are responsible for the development of upland agriculture in their respective countries. In addressing the opening of the seminar, I would like to present a short reflection and the background which led to this seminar. As the distinguished participants are aware, the CGPRT Centre has been working for a decade as a regional institute for CGPRT crop development, promoting and undertaking research and development which has provided researchers, extension workers and policy makers with useful problem-solving tools, experience and knowledge. In response to the changing and emerging needs caused by fast economic growth and subsequent changes in farm economy and food consumption, the Centre recently reviewed and redefined its future directions which culminated in the Strategic Plan for the CGPRT Centre in the 1990's and Beyond. The following five inter-related themes have been identified, based on new developments and emerging needs in agriculture of the region: market development and post-harvest processing; changing demand structure including development of agribusiness and its effect on production systems; sustainable agriculture and resource management; agricultural diversification and poverty alleviation; and regional cooperation and policy analysis. Upland is the major agricultural sphere where CGPRT crops are grown and a majority of upland farmers rely on CGPRT crops as their main source of income. Upland agriculture is often located in remote and fragile environments where sustainable development is crucial to the overall equitable development of agriculture, and consequently of the economy as a whole. In some parts in the region, marginalization of upland agriculture has been proceeding while flat and lowlands have been gradually developed and irrigated. The themes of the seminar Upland Agriculture in Asia have been chosen against such a background. Upland agriculture has been affected by the wave of commercialization, in some areas even more so than lowland and rice-based agriculture, because of the products grown. For the same reason, adding value to farm products through processing, marketing and agricultural diversification is equally or more important in upland areas. As I pointed out earlier, upland agriculture calls for great attention to its fragile environment, low productivity and low. * Director, CGPRT Centre, Bogor, Indonesia. 1

3 2 Introduction income. Past development efforts have to some extent ignored upland agriculture. Development of upland agriculture is of growing importance and urgency. In light of these observations, the following three issues of upland agriculture were selected for the seminar: diversification and commercialization of upland agriculture; changing food consumption, agro-industry and upland agriculture; and rural income, resource management, and sustainable upland agriculture. With the participation of senior researchers, senior research managers and policy makers from all over Asia, the seminar will no doubt shed light on the present situation and future prospects of upland agriculture of the region. As the organizer, the Centre further hopes to receive specific recommendations from the seminar regarding the future program of the Centre on upland agricultural development, which should better respond to the needs of member developing countries and benefit the vast population of upland farmers. I thank you again for your attendance, and wish you every success in your deliberations.

4 Rural Poverty, Viet Namese Agriculture, and Major Agricultural Policies Le Van Bain* Recent agricultural development Agriculture plays a very important role in the national economy of Viet Nam. Fifty percent of the annual national income comes from agriculture, and the labour force engaged in agricultural production, i.e. nearly ten million households, accounts for 75% of the total labour force in the country. Therefore, development of agricultural production is of paramount significance in the country's socio-economy. Viet Namese agriculture is divided over seven ecological zones: the northern midlands and mountains, the Red River delta, the north central coastal part, the south coastal area of the central zone, the western highlands, the south-east zone and the Mekong River delta (Figure 1). Agricultural land occupies 6.99 million ha, accounting for 21% of the total natural land with 4.2 million ha under rice cultivation. Over 50% of the agricultural land is non-irrigated and used for upland agriculture. In general, the natural conditions are favourable for crops and animal production. The average temperature ranges from 22 C to 27 C, the number of sunlight hours from 1500 to 2000, the average rainfall from 1800 to 2000 mm, and the average humidity from 80 to 87%. These factors make it possible for Viet Nam to develop a diversified agriculture. Rice is the most important crop. Every year the rice cultivated area is 82 to 85% of the total area under food crops. The second most important crop which is also developing rapidly is maize. In the livestock sector, the pig is the most important animal, followed by cattle, buffalo and poultry in decreasing order of importance. Viet Nam is a highly populous country with a great demand for food and other goods. Moreover, the economy is still poor with low export income. Therefore, there is an obvious need to boost agricultural production, especially food production, in order to meet the people's demands and improve the national economy. Thus, the Viet Namese government has decided that development of agricultural production should be the prime task with development of food production as it's core. In fact, agricultural production in Viet Nam has already progressed in line with this decision. During the 1980s and particularly since 1988, significant achievements were recorded in agricultural production, especially in production of food and other farm products for export, to meet people's food demands, to make available food for reserve, and to ensure annual exports of 1 million tons of rice. The development of agricultural production in recent years has contributed to reducing the inflation rate and initially stabilizing the socio-economic situation. Food production in Viet Nam is developing increasingly towards intensive farming and simultaneously expanding foodcrop growing area wherever possible. Since 1988 there has been a rapid increase in food production, especially rice production, in terms of area, yield, and * Department of Agricultural Science and Technology, Ministry of Agriculture and Food Industry, Viet Nam 83

5 84 Country Paper Figure 1 Agricultural zones of Viet Nam.

6 Agriculture in Viet Nam 85 output. Compared with 1987, annual food production in the period increased by 4.5% on average. In some newly reclaimed areas, food production increased as much as 29% (in Long Xuyen region) or 16% (in Dong Thap Muoi region). Rice production in 1992 had also increased in comparison with 1987 in terms of area by 14.9%, yield by 24% and production by 42.3% (Table 1). In An Giang province, the average rice yield in the period was 12 tons per hectare per year. Rice yield in Thai Binh province in 1991 was 10.1 tons per hectare. Table 1 Food Production in Viet Nam, Food crop growing area ('000) ha) 6, , , , , ,614.6 Rice ('000 ha) 5, , , , , ,422.8 % Maize ('000 ha) Food output in paddy equivalent (million) tons Rice component Rice yield ('00 kg/ha) Maize yield ('00 kg/ha) Source: General Department of Statistics (GDOS). Perennial industrial crops such as rubber, coffee, tea, mulberry, and pepper have also developed remarkably. The coffee growing area was 93,200 ha in 1987, compared to 115,000 ha in 1991, and coffee yield increased to 1,020 kg/ha in 1991 from 560 kg/ha in Rubber production in 1992 had increased by 42.5% compared with The area under rubber increased from to thousand hectares while production went from 51.7 thousand tons to 73.7 thousand tons. Production of other crops such as soybean, sugarcane, and groundnut has also been growing in terms of area, yield, and output but at a slow rate. Recently, the government's attention has also been focused on development of other crops such as mulberry, cashew nut, and fruit crops (orange, pineapple, banana), but the area under these crops is still small.. Table 2 Quantities of large animals, poultry and livestock products, Livestock Population Buffalo ('000 head) 2,752 2,806 2,871 2,854 2,885 Cattle ('000 head) 2,979 3,126 3,201 3,120 3,115 Pig (million head) Poultry (million birds) Livestock Products All meats COO tons) ,008 1,015 Pork component ('00 tons) Eggs (millions) , ,016.9 Honey (tons Fresh milk (tons) ,763 8,748 Source : General Department of Statistics (GDOS) In recent years pig, cattle, buffalo, and poultry production in Viet Nam has been growing at a slow but steady rate (Table 2). The percentage of hybrid pigs and introduced cattle breeds has increased remarkably. The average weight of pigs at the time of sales has increased from 62 kg/head in 1985 to 67.2 kg/head in Since 1990, over one million tons of live weight meat have been produced, i.e. an increase of 15% over 1987.

7 86 Country Paper Viet Namese agriculture has been developing towards specialized commodity production in different areas as follows: rice production in the Mekong River delta and the Red River delta, coffee production in the central western highland and the south-east region, rubber production in the south-east region, tea production in the northern midlands and mountains, and pig production in the Red River delta, the Mekong River delta and the southeast region. The establishment of these specialized commodity production areas has resulted in a continuously increasing quantity of export goods (Table 3). Table 3 Export of agricultural products ('000 tons) Rice , , ,000.0 Tea Coffee Rubber Groundnut Canned fruits Processed meat Source: General Department of Statistics (GDOS). Foreign exchange earnings gained from the export of farm produce and processed farm products increased from US$ 349 million in 1988 to US$ 742 million in 1989 and US$ 783 million in Agricultural production is now undergoing positive changes in balancing the output values of crop production and animal production. The total output value of crop production decreased from 75.4% in 1985 down to 74.5% in 1991, while the total output from animal production increased from 24.6% in 1985 to 25.5% in In spite of the above mentioned achievements, Viet Namese agriculture still remains small scale with poor quality and out-of-date material and technical infrastructure. Crop and animal productivity are still low compared with other countries in the Asia-Pacific region. Farmers still have poor standards of living and there is a lack of funds for development of production. Farm product processing has improved very little in terms of quantity and quality. The domestic market is still far from competitive; at the same time, the foreign market has not yet been stabilized or expanded. These are some difficulties which the government is trying to overcome now to speed up agricultural development in the future. Upland agriculture in Viet Nam Viet Namese agriculture is divided into 7 zones, of which 5 are considered to be areas for upland agriculture (Table 4). These 5 zones comprise 82% of the natural area of the whole country, including 35 provinces and cities (66% for the whole country). Therefore, agricultural development in these zones is very important. The agricultural area is 3.72 million ha, i.e. 53.3% as compared to the agricultural area for the whole country, of which 1.65 million ha is planted to rice, 0.95 million ha to subsidiary and annual industrial crops, and 0.5 million ha to perennial industrial crops, etc.

8 Agriculture in Viet Nam 87 Table 4 Production of food ('000 tons rice equivalent) of upland agricultural zones. Zone Midland and mountain 1, , ,349.8 North of central coast 1, , ,998.0 South of central coast 1, ,875.6 Western highland South-east of south , Total 6, , ,787.0 Source: General Department of Statistics (GDOS). Generally, the soil and climate conditions of upland zones are more suitable for growing annual industrial crops and perennial industrial crops than for growing rice. Recently, upland agriculture in Viet Nam has been oriented towards food production. In particular, perennial industrial crop production is now increasing as the Viet Nam economy becomes market driven. Animal husbandry (cattle) is also developing. Upland agriculture production has played an important role in export turnover in Viet Nam. During the period the cultivated area for food crops has tended to increase, and then to decrease in the period Food output (in paddy equivalent) decreased slightly. Rice is a major crop occupying 69-72% of the area under food crops. From 1988 to the present, the cultivation area for rice has tended to decrease. In general, rice productivity is low, only reaching tons/ha, which is merely 60-70% of the average rice productivity for the whole country. It is noted that in 130,000 ha under shifting cultivation in upland agricultural zones, only tons of rice were produced per ha. Therefore, it is necessary to limit the area for shifting cultivation rice, so that erosion can be controlled. Yields of other crops are still too low, eg. maize ton/ha, sweet potato 4-6 tons/ha, and cassava 7-9 tons/ha. From 1980 to the present, the area for industrial crops increased quickly (Table 5). Productivity of rubber, coffee, tea, sericulture, etc. has increased, especially since For instance, yield of coffee was 0.56 ton/ha in 1987 and 1.02 ton/ha in The export products from upland agricultural zones have also increased quickly. Table 5 Industrial crop areas, Crop /1980 (000 ha) (000 ha) (000 ha) (%) Sericulture Tea Coffee Rubber Source: General Department of Statistics (GDOS). Development in upland agricultural zones Development in food production in general, and in perennial industrial crops and animal husbandry (cattle) in upland agricultural zones in particular, is a remarkable achievement of Viet Nam agriculture. Nevertheless, natural conditions, socio-economic factors, as well as traditional cultivation practices hamper development of upland agricultural zones.

9 88 Country Paper Upland farmers are still mostly subsistence farmers and the proportion of poor households in these zones is higher than in rice intensive cultivation zones. The complicated topography includes various sub-zones. Climate and weather are often not suitable for agricultural development; calamities such as drought, storms, and flooding occur, and much of the land is infertile, especially the land for annual crops. The infrastructure in upland regions is poor; the transportation system and irrigation networks are deteriorating. Fifty percent of communes cannot be reached by road, so transport of material and products is expensive. The level of education is low and the availability of medical services poor. However, the upland agricultural zones present some advantages. The natural conditions are suitable for perennial industrial crops such as rubber, tea, coffee, mulberry, fruit trees, sugarcane, and cotton, which have great export value. The upland areas are also suitable for development of cattle husbandry to meet demands of consumption and export and to supply draught power for lowland agriculture. Much land which is still under-exploited could be reclaimed for agricultural activities. Surveys made in 1990 indicate that 10 million ha of land in upland agricultural zones are still under-utilized. Of this, 1.87 million ha could be used for agriculture, and another 0.53 million ha of land could be used for single rice cropping (Table 6). Table 6 Agricultural and wasteland in upland agricultural zones. Midland& North of South of Western South east Land type Total mountainin central central highlands zone the north coast coast Agricultural land (total hectares) 3.727,967 1,226, , , , , Land for annual crops of which 2,658, , , , , ,754 Land for rice cropping 1,657, , , , , ,868 Area for one rice cropping 570, ,016 73,657 89,023 75, ,808 Land for subsidiary food and annual 932, , , , , ,425 industrial crops Industrial crops 2. Land for perennial crop 676, ,148 91,274 51, , , Grassland 312, ,936 50,284 10,713 34,568 3, Water surface used for agriculture 71,152 24,579 12,476 7,475 5,078 21,544 Wasteland (total hectares) 13,744,831 6,459,626 2,465,294 2,366,822 1,675, ,531 Area that could be used for agriculture 1,870, , , , , ,000 Source: General Department of Statistics (GDOS). In the past (under the central plan aimed at achieving food self-sufficiency) upland agriculture focused on food production. Recently, however, upland agriculture has gradually become part of integrated development objectives with 4 main targets: to increase capacity for livestock and crops, to accelerate output and improve quality of products, to promote economic efficiency of production and improve farmers' living conditions, to develop sustainable agriculture, to improve land fertility as well as to protect the environment, and to develop agriculture in conjunction with integrated rural development. To achieve these targets, agricultural development for uplands in this decade should be oriented towards diversification of crops based on identifying major product groups; further investment for intensive cultivation together with extension of area by reclamation, intermixing and cropping; development of production models for agro-forestry; and linkage of agricultural production with processing industries in each sub-zone.

10 Agriculture in Viet Nam 89 Therefore, the following 10 groups and product types need to be emphasized in coming years: Food production should be increased aiming at local self-sufficiency and for feed resources for development of animal husbandry, stabilizing the area for rice and cassava, decreasing gradually the area for shifting cultivation of field rice, and enlarging the area for corn. Tea should be intensively cultivated and the area extended in the northern mountains, central highlands and the northern part of the central coast. The area for rubber plantations should be increased 1.5 to 2 items. Coffee should be intensively cultivated and Arabica developed in the northern midlands. Sericulture should be promoted. Cotton should be developed to supply material for textile industries. Cashew and sugarcane should be developed. Various types of root and tree crops such as groundnut, soybean, greenbean, and vegetables should be developed. Fruit crops such as pineapple and banana should be developed. Animal husbandry including cattle, buffalo, goats, and bees should be developed. To develop upland agriculture, it will be necessary to invest in fertilizers (nitrogen, potassium and phosphorus), as well as pesticides. In practice, intensive cultivation of corn can reach 5-7 tons/ha, coffee 2-3 tons/ha, and tea tons/ha of dry bud/ha. Infrastructural investments for building and extending roads, water conservancy works, hydropower, etc. to meet demands of irrigation, drainage and living for farmers are required. Improved educational and health facilities are also needed. The state should have an adequate macro policy to encourage farmers, including credit with rational interest, consumption, insurance, agricultural tax, and training for local staff. Investment in scientific research should be promoted, aimed at developing upland agriculture and applying advancements to production. First, research should be focused on selecting and creating new crop varieties which give high productivity and resistance to drought and pests, as well as on intensive cultivation technologies. Diversification of crops should be investigated to accelerate the rate of development of commodity production in upland agriculture, where land potential is not yet fully exploited. Poor farmer households in upland rural areas. There are poor and rich farmers as well as poor and rich zones in rural parts of Viet Nam and many other Asian countries. At present, in Viet Nam there exist different opinions about the poverty line. Above all, the determination of the poverty line should be based on per capita income which should be under one third of average farmers' income. In addition, it is also necessary to consider housing conditions, means of production, capital, and household amenities. Since the adoption of the policy for renovation of agro-economic management aimed at transforming agriculture into a multi-sector commodity production system in line with the market economy, a lot of farmers have prospered. As indicated by the 1992 survey in 9 communes of 7 economic zones, the rich farmer households constituted 12-20% and the poor ones 10-25% of the farm population. In areas where local conditions were not favourable for agricultural production, the percentage of poor farmer households was as high as 30%. It was

11 90 Country Paper found through 3 surveys that there has been an increase in the number of rich farmer households and in their incomes, as well as in poor ones' income. According to the poverty line established in 1992, a farm household was considered poor when the income was only 13.2 kg of rice per capita per month. In our study of 496 poor farmer households' production in 7 zones, we have found that their average per capita land holding is only 2,771 square meters per household, or 477 square meters per capita on average, and the lowest land holding was 2,036 square meters per household. Meanwhile, the rich farmer household's average agricultural land holding is 4.5 times as much as that of the poor ones. Similarly, the dwelling and horticultural land owned by the rich farmers is double that owned by the poor farmers. The average land use coefficient of the poor is only 1.2, while it is over 2 in the case of the rich. The poor households only use one third of the workdays of the year. Their level of education is very low. On average, 24.3% of the poor farmers are illiterate and the percentage of the poor farmers holding a secondary school degree is only 1.7%, and their knowledge of farming technology is slight. In general, the means of production are insufficient, which often causes delays in production. On average, there is only one draught animal and 3 ploughs for every 10 households. Each household has only 4 hand tools of different kinds. These production conditions have led to very low production and living standards of poor farmers, who mainly practice monoculture. Regarding their income, 63% comes from their crop production, 25% from sale of labour, 6% from animal husbandry and 6% from other sources. The average household income is 1.48 million dong per year, or 21,130 dong per head per month on average, which is equivalent to 13.2 kg of rice. In areas where production conditions are unfavourable, the farmers' income is only 18,000-19,000 dong per head per month. The rich farmers' income was 10.1 times in 1991 and 8.2 times in 1992 as much as that of the poor ones; for upland agriculture the rich farmers' income was times that of poor farmers. Regarding housing conditions, 72.6% of the poor farmers live in thatched roof cottages, only 5.7% of them live in brick houses, and the remainder live in huts. On average, each farm household has one wooden or bamboo bed and some other cheap and simply made amenities. Twenty percent of the poor farmers are starving for 5 months per year and 35.7% of them for 6 months or longer. The causes of farmers' poverty are both subjective and objective (Table 7). The most important cause is the lack of working capital. Interviews revealed that 91% of farmer households lacked capital for buying fertilizers, seed, etc. for their production and the majority of them were in need of credit. Poor knowledge of technologies in crop and animal production and business and service operations was noted on average in 46% and up to 80% of farmers households in some areas. In 1990, after completion of training on rice intensive farming techniques organized for farmers in Hai Hung province, 98% of the participants reported that it was useful and 78% of those interviewed said it gave them a lot of new and interesting information. The shortage of cultivable land and unemployment should be considered too. Sixty-one percent of the interviewed households lacked land for cultivation. Many of them were afraid that taking the whole portion of land allotted would only lead to financial difficulty causing joblessness and forcing them to hire themselves out as labourers. In addition, households are generally large but the number of main labourers in the family is small. Out of 5.8 members per household, only 2.4 are labourers. In some areas a household averages 6.4 members, so a main labourer has to feed 2-3 others in the family. Moreover, a poor household often suffers from sickness or accidents.

12 Agriculture in Viet Nam 91 Table 7 Causes of poverty Item All Hoa Ha Nam Thanh Binh Dao Dong Tien Don provinces Binh Bac Ha Hoa Dinh Lac Nai Giang Thap 1. Total number of families surveyed Causes of poverty Number children/lack of manpower (%) Lack of land (%) Lack of capital for production (%) Accident, bad luck (%) Lack of work experience (%) Uplanned spending (%) Disease (%) Without other occupation (%) Miscellaneous (%) Families with less than 7 months food (%) Families whose children gave up school because of poverty (%) Source: General Department of Statistics (GDOS Helping poor farmers to develop their production and improve their life has always been a concern of the government and also a good tradition of the Viet Namese people. At present, a "hunger eradication and poverty alleviation" campaign is operating in many parts of the country with the support of many relevant socio-economic policies and through concrete measures, including: 1) a policy for extending credits to farmers, especially poor ones, to help in their production with regionally-specific reasonable interest rates; a policy for agricultural taxation that considers soil types (to decide tax exemption or reduction); and the training of farmers in agricultural techniques and encouraging various economic agencies. mass organizations (such as the peasants' association, the women's union, the youth's union, cooperatives) and rich farmers to assist the poor farmers in developing their production. Good results have been obtained so far, thanks to these measures. In 1992, on average, each poor household was aided with 115,000 dong of which 45.5% came from the government. 35.5% from the cooperatives, 19.7% from the neighbourhood and 2.4% from other organizations. The poor farmers' income in 1991 increased by 11.3%, compared to 1990 and in 1992 by 15% compared to Improvement of the poor farmers' living standard is a continuous and complicated process. To be successful, the government has to establish relevant policies at the macro level on one hand and work out concrete measures of implementation on the other, and encourage cooperation of every organization and every individual concerned. The long term approach should be to assist the poor farmers to help themselves out of their poverty. Major policies for agricultural development All the present agricultural development policies are focused on full utilization of the available resources of manpower, land and funds of all sectors of the economy in the country, as well as taking advantage of foreign assistance and investment. The objective is to speed up agricultural development to raise farm income and contribute to improvement of the national economy. Since 1988, the Viet Namese government has promulgated several new policies which have been willingly accepted by farmers and become instrumental in maintaining the momentum of agricultural development. The main policies include:

13 92 Country Paper Policy for encouraging agricultural development by various sectors of the economy Previously, agricultural cooperatives and state farms were considered to be the main agricultural production sector which controlled almost all productive activities of cooperative farmers and state farm workers. However, since 1988 farmer households have been made self employed agricultural producers and given land on long term lease. Households have the right to purchases and own other means of production, to establish their own production facilities, and they are free to sell their products and liable for the outcome of their own production. As a result of this policy, farmer household income has been constantly rising. For instance, the farm income growth rate before 1987 was only 1.7% per year, but during the period this rate was 4.6% on average. All sectors of the economy (private, collective, and state) are now allowed and encouraged to develop agro-forestry production. Foreign companies and individuals are encouraged to make direct investments or to establish joint ventures with different sectors of the economy of Viet Nam to develop agricultural production and to transfer technology. Investments mush be in compliance with the foreign investment laws of Viet Nam. Agrarian policy The government will allot land to farmer households on long term lease for the purpose of developing agricultural production for periods such as years, in the case of annually cultivated land, and years for unused or bare land. Farmers have the right to inherit land and to choose crops and animals to be produced on the land to ensure the highest profitability. The present agrarian policy is economically and socio-psychologically suitable for farmers and motivates them to mobilize more inputs for intensive farming and increase their production without any uncertainty. According to statistics of the Ministry of Agriculture and Food Industries, during the period, farmers in 3 provinces (Thaibinh, Hanamninh and Hasonbinh) bought 37,000 cattle and buffaloes. In Hasonbinh province the quantity of small farm machinery and pesticide sprayers increased by 2 times and 5 times, respectively, over the previous period. Fertilizer supply per hectare of rice field increased 50% and even doubled in some cases. Thus, this policy has become a major factor for developing agricultural production and the household economy. Policies for pricing, goods circulation and marketing of products Previously, marketing of agricultural products was only undertaken by state-run companies. Now all sectors of the economy (state, collective, private) are allowed by the government to engage directly in business and marketing of products. provided they have sufficient working capital and have registered their business with the government. The government has stopped completely its purchase of farm products from farmers at prices lower than the market prices and started a new system where pricing is decided in line with the market mechanism based on an agreement between sellers and buyers. The government has also stopped its marketing restrictions and allowed different sectors of the economy to make a free circulation of goods and free choice of sites to ensure the best sale of their products. The government is responsible for seeking export markets for farm products, especially those in large quantity, buying surplus food for reserve to stabilize food prices, stimulating production, protecting the interests of consumers and encouraging farmers to produce more agricultural commodities.

14 Agriculture in Viet Nam 93 Credit policy The government has issued a policy giving farmers permission to obtain loans from state banks for development of their production with a reasonable interest rate which varies in different areas, for different crops, seasons or years. Farmers' present demand for credit is quite large. A recent survey of 3,057 farmer households in 7 areas showed that 54.9% of farmer households needed loans for their production. At present, the government can satisfy only 30% of the farmers' demand for credits. Only 20% of the total farmer households have borrowed money from banks. Policy for providing inputs (fertilizers, pesticides, veterinary drugs) for agricultural production Previously the supply of agricultural inputs was undertaken by government agencies in a single price system where the government sold agricultural supplies to farmers and purchased their food products in a certain exchange ratio varying in different areas. Now the government ensures adequate supply of agricultural inputs for farmers through importation and domestic production and allows various sectors of the economy to be involved in supplying agricultural inputs to farmers. Therefore, the quantity of agricultural inputs supplied to farmers has been constantly increasing. For example, the quantity of urea (SA) delivered for crop production increased from 1.4 million tons in 1985 to 2.1 million tons in 1990 and to 2.2 million tons in Agricultural supplies are now more readily available to farmers. The prices are decided in agreement between the seller and the buyer. Accumulation of fertilizer, pesticide and veterinary drugs during marketing is not required by the government. As an additional stimulus, a sixty percent discount of electricity fees is granted in favour of agricultural production in normal hours (from 11 pm to 4 am every day), when not much power is used by the public. Incentive policy for transfer of technology Scientists are always encouraged by the government to improve production technologies. Tax exemption is given to production establishments and farmers who are willing to adopt improved technologies. Furthermore, the government covers salaries of scientists, extension workers, training, publicity and demonstration of improved technologies. In the coming years, the government will continue to finalize the present policies and promulgate some new policies in favour of production insurance, protection of farm products, extension services, etc, all of which will be put together in a strong package of policies aimed at rapidly turning Viet Namese agriculture into a commodity production system with a high pace of development.

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16 Marketing Upland Crops for Rural-Based Economic Development Yujiro Hayami * Introduction Relative to wet rice areas, upland areas have lower and more variable incomes; not only is the areas' agricultural productivity low, but also the areas are remote from major development currents and have received less public support for the development of infrastructure such as irrigation systems and roads. Adding value to farm commodities through processing and trading is especially important in these neglected areas. In fact, traditional upland crops, which were in the past grown mainly for subsistence of peasant producers, have much larger potential than rice to add value to national income and product through processing. In Indonesia, for example, soybeans are processed into a variety of food products such as tofu (soybean curd), tempe (fermented soybean) and kecap (soya sauce). As per capita income has been rising, demand for these protein-rich foods has increased such that Indonesia was forced to move from self-sufficiency in soybean before 1975 to the import of almost 40 percent of domestic consumption by the mid 1980s. Similarly, cassava is processed into starch both for export and for domestic use after being processed into a variety of snack foods for which demands have also been rising rapidly. Also, relative to irrigated rice areas where rice monoculture prevails, upland areas have a larger scope to increase farm income by combining high-value commercial commodities such as livestock and horticultural products. In fact, the two strategies to increase employment and income in marginal upland areas, (a) to develop processing and trading of traditional upland crops for increasing value added to farm-produced materials and (b) to combine production of traditional upland crops with high-value commercial commodities, are highly inter-related. Commercial livestock and poultry production must be supported by development of the marketing network to convert traditional upland crops such as corn and cassava into feeds for animal and poultry growers as well as to transport livestock and poultry products to urban markets. Likewise, a condition to incorporate horticultural production at a commercial scale into farming systems in marginal upland areas is the development of an efficient system of marketing vegetables and fruits, which requires much better coordination than for marketing traditional upland crops in order to deliver these perishable commodities to urban consumers while maintaining quality. This paper aims to illustrate these contributions of marketing and processing to the development of rural economies in marginal upland areas, mainly based on case studies in Indonesia. Social conditions and government policies under which such contributions can be maximized will be investigated. After this introduction, the following sections report i) analysis of a typical upland village in West Java, where traditional upland crops such as corn, soybean and cassava are * Aoyama-Gakuin University, Tokyo, Japan

17 96 Thematic Paper grown; ii) analysis of a case in which the production of commercial vegetables for metropolitan markets has recently been introduced with major changes in marketing systems; and iii) empirical findings outlining the characteristics of peasant marketing organization and pointing the direction of government policy efforts toward development of this system. Field research, on which this study is based, was conducted as a project of the CGPRT Centre. Results of this research were initially reported in the Centre's publications (Hayami et al. 1987, 1989, 1991), and were later put together into a book by Hayami and Kawagoe (1993). Readers who may want to know analysis and data in detail are advised to read this book. Marketing of traditional upland crops We begin exploration into a typical peasant village in upland Java. This village is located on a hilly plateau surrounded by mountains, where farmers have traditionally inter-cropped coarse grains, pulses, roots and tubers (CGPRT crops). In addition to the advantage of maximizing the use of scarce land, inter-cropping has several advantages, such as maintenance of soil fertility and biological stability against pest infestation. Operational farm sizes are very small, with an average size of 0.5 hectare and only 8% of farmers cultivating more than 1 hectare. Village-based traders The small farm with the practice of inter-cropping of several commodities implies the very small marketable surplus of each crop in each household. The small agricultural surpluses of peasant households are assembled by a large number of small middlemen at the village level for delivery to processors and traders in local towns. There is a hierarchy of these village-based middlemen, called collectors, ranging from the "hamlet collector" at the bottom, to the "village collector" and on to the "inter-village" collector at the top. Hamlet collectors collect small amounts of produce from neighbouring farmers in the same hamlet. Typically, a hamlet collector is tied to a village or an inter-village collector, from whom he receives an advance payment to finance the purchase of produce from farmers, and to whom he then delivers his collection. Village collectors also collect directly from farmers over a somewhat wider territory encompassing several hamlets or villages. They only occasionally buy from hamlet collectors. A major difference between hamlet and village collectors is that the latter have much greater autonomy in disposing of their collected commodities. Village collectors may choose to sell their collections to inter-village collectors, processors, or town traders in their own district or in other districts. While hamlet collectors are essentially casual employees working on commission, village collectors are independent small-scale traders. Inter-village collectors are similar to village collectors but their activities encompass much wider territories, covering several villages, and they handle a much larger volume of commodities. They collect goods mainly from hamlet and village collectors and seldom buy directly from farmers. These collectors are living in a village and doing business part-time besides farm work. The hierarchy of collectors parallels the hierarchy of landholders. Most hamlet collectors are landless farm labourers and marginal farmers. Small returns from petty trades are important supplements to the income of people in the poorest class in the village community. Most village collectors are middle class peasants whose farm operations are based mainly on family labour. Most inter-village collectors are large landholders who rely heavily

18 Marketing Upland Crops 97 on hired labour for the cultivation of their land and often rent out a part of it. ("Large holders" in the Java context hold only a few hectares, seldom above ten hectares). The parallel between the amount of land owned and the scale of collecting and trading seems to reflect the direct correlation between the amount of land owned and the ability to mobilize working capital for trade. Peasant producers themselves play an important role in marketing their products. It is not uncommon for peasants' wives and daughters to peddle home produce outside the village. It is also not uncommon for farmers themselves to carry their products to town for sale to traders in the bazaar or for direct supply to processors. The distinction between farm producers and village-based middlemen is therefore not complete. Town-based traders Trading activities in towns in Indonesia are centered around the bazaar. The bazaar (pasar in Indonesian) is a market place set up in a space usually provided by a municipal government. It has rows of roofed selling stalls (kios). Open space between these roofed stalls is also used by small vendors in their retail activities. Those who sell commodities in the bazaar are required to pay certain fees to the municipal authority for using the bazaar facilities. Not all town-based traders are located within the bazaar. For expository convenience, however, we treat them all as based in that bazaar since their activities are integrated with the bazaar activities, either directly or indirectly. Given this simplification, town-based traders may be classified into bazaar traders and vendors. Bazaar traders purchase farm products brought to them by village traders and farmers, and sort, grade and pack the products for transshipment to traders in other districts. They also engage in retail trades with local customers. Most larger scale traders operate at shops (toko) inside permanent buildings along streets surrounding the bazaar, while smaller scale traders operate in roofed stalls inside the bazaar. Many of the toko traders are ethnic Chinese; the bulk of their business is inter-regional wholesale trades. Beside, the toko and the kios traders, there are many petty traders who sell commodities that meet daily needs in open stalls or on the street in the bazaar. Their customers are consumers and petty retailers such as peddlers and small grocery store (warung) keepers in the town and village. Bazaar vendors do not usually deal with storable farm commodities, such as soybean, which can be handled relatively easily in large quantities, but they provide an important marketing channel for perishable commodities. Some of them living in villages bring fresh fruits and vegetables to the bazaar. Processing industries To have a good understanding of local marketing of farm products, it is necessary to have a clear picture of the nature and the location of farm product processing industries. Some farm products are processed in modern factories for urban use or export, such as cassava starch, bolting mills and cigarette factories. At the same time, many. farm products are processed by village-based industries for local needs. For example, crude cassava starch and sliced tobacco for local consumption are produced in small factories located in villages. Most operators of such industries belong to the same class as inter-village collectors in the village community and own relatively large farms. The scale and location of soybean processing industries are different for different products. The production of tempe involves a very simple process and requires little capital. Its production is mainly based on family labour, sometimes supplemented by a few hired

19 98 Thematic Paper labourers. A large number of such mini-sized tempe factories are dispersed widely in villages and towns, each supplying the demand from a small neighbouring population. Most of villagebased tempe producers belong to the same social class as village collectors and some belong to the same social class as hamlet collectors. The production of tofu requires a much larger amount of capital and, therefore, is usually carried out on a much larger scale than the production of tempe. Unlike the mini-sized tempe factories, relatively large-scale tofu factories tend to be based in towns and supply a larger population of consumers. Many large-scale tofu factories in town as well as cassava starch refineries are owned and operated by ethnic Chinese. The organization of peasant marketing Why was the division of labour in the local marketing of CGPRT crops structured between small traders who live in villages and collect farm products little-by-little from neighbouring farmers, and larger traders who engage in the shipment to other districts of the commodities collected by the small traders? It is common that the latter advances credits to the former to ensure delivery of the collected commodities for trans-shipment. The hierarchical division of labour seems to have stemmed from: peasant producers' small marketable surpluses, scale economies in transportation, differences in labour opportunity costs, and differences in financial positions. Large traders need to collect commodities into a lot sufficiently large to exploit the scale economies for long distance transportation of bulk commodities, such as soybean and maize. It is economical for them to let small traders having lower labour opportunity costs collect from small farmers in small amounts. Indeed, small collectors are themselves small farmers or agricultural labourers who trade these commodities in their spare time. On the other hand, large traders own real assets such as land and buildings that can be used as collateral. Therefore, their credit cost is substantially lower than that of small collectors with no collateral. Usually, interest is not explicitly charged on the trade credit. Also, the practice of reducing purchase prices by large traders from small collectors for advanced credits is not used. The interest foregone is considered a premium for the assured delivery of collected goods that enables large traders to schedule shipment in large lots. This flow of trade credit is limited mainly within the circle of village-based traders. Bazaar traders in town, who are mostly ethnic Chinese, seldom advance credit to village-based traders because they do not have a common community tie to enforce credit repayment. By taking advantage of the close community tie with farmers and small collectors, large villagebased traders who are relatively large land-owners are able to compete with town traders in the inter-regional trans-shipment of locally-produced farm commodities. While credit tying is common among village-based traders, it is seldom practiced between traders and farmers. This is partly because the financial position of small traders in village is no better than that of farmers and partly because the farmers' need for credit is relatively small in this area because upland crops planted in an inter-cropping system are harvested one by one fairly continuously over a year. Efficiency in marketing Despite the hierarchical organization among traders tied by trade credit, there is no sign of monopolistic pricing. Price differences among various points in marketing chains are