Agricultural Diversification and Vulnerability to Poverty: A Comparison between Vietnam and Thailand

Abstract

Thailand and Vietnam are two emerging market economies where agriculture still plays an important role even though its contribution to their GDP has been reduced from 16 per cent and 40 per cent in 1985 to around 12 per cent and 22 per cent in 2008, respectively.¹ In the rural areas, however, agriculture is still the major source of income and employment. Agriculture in Thailand and Vietnam has differences as well as similarities. One of the main differences relates to the historical perspective. In Vietnam, prior to the introduction of the doi moi policy, performance of the agricultural sector was strongly influenced by the centrally planned economic system; the policy change towards a market-based pricing system of agricultural commodities can be seen as a starting point for a period of sustained growth in output and productivity. Today, Vietnam has become a major player in world food markets, and the country now ranks third among the world’s leading rice exporters. However, Vietnam’s economic policy reform has also introduced risks into the agricultural sector and the rural areas. The process of liberalization and rapid integration into the world economy with less trade protection and reduced subsidies has exposed the domestic markets to the fluctuations of the international markets. In contrast, such risks are not so severe in Thailand, as the agricultural sector has benefited from a long history of commercialization and market orientation. Thailand is now the top exporter for a number of agricultural raw materials and processed food products. The country has a well developed agribusiness sector, with some large multinational co-operations.