Business Sector Programme Support (BSPS)Component 5: Business Sector Research with Institute of Labour Science and

Social Affairs (ILSSA) and Central Institute for Economic Management (CIEM)

and

Poverty Reduction Grant (PRG)Strengthening the Development Research and Policy Analysis Capacity of the

Central Institute for Economic Management (CIEM) (Phase 2)

TRAVEL REPORT NO. 03/06

FOR TRAVEL TO VIETNAM UNDERTAKEN BY FINN TARP, HENNING TARP JENSEN, PHIL ABBOTT, JOHN RAND AND THEO LARSEN

JUNE-JULY 2006

1. Introduction

This report briefly summarizes the activities and results of the travel undertaken by Finn Tarp, Henning Tarp Jensen, Phil Abbott, John Rand and Theo Larsen to Vietnam in June-July of 2006. The terms of reference (TOR) for the travel can be summarized as follows:

1. Monitor general progress under the BSPS (Component 5) and PRG projects, and report to Danish embassy etc on work and financial matters. Finn Tarp to contact Embassy upon arrival to agree on meeting times. A series of admin issues will also be followed up.

2. Plan and implement workshop on 6 and 7 July (from DoE side Phil Abbott, John Rand, Henning Tarp Jensen, Theo Larsen and Finn Tarp will contribute and also Henrik Hansen will make a presentation).

3. Status and follow up work jointly with DoE and CIEM on provincial profiles (Theo Larsen from DoE side will work together with relevant CIEM staff).

4. Further work on PRG research project 1 (Henning Tarp Jensen and Finn Tarp will in addition to the 6 to 7 July workshop give a two day training programme organized together with Mr. Thanh on Thursday and Friday 13 and 14 July).

5. Further work on PRG research project 2 (Phil Abbott and Finn Tarp will work with Dr. Thanh and Dr. Huong on this – follow up on two consultancies is important).

- - 1

6. Discussing SME survey work (John Rand and Finn Tarp will follow up on this in light of the discussions on the workshop 6 and 7 July). The data base is now in hand and analytical work can begin jointly among the partners involved.

7. Review any issues related to the launching of the BSPS household survey undertaken by ILSSA. The survey will start in the BSPS provinces next week, and we will be available to discuss any problems and issues and to discuss ideas for future research.

8. Ad hoc issues and work as required.

2. Activities performed and follow-up

The activities performed are summarized in accordance with the outline in the introduction in what follows.

Ad. 1: Monitor general progress under the BSPS and PRG projects and report to Danish Embassy

The work under this heading can be listed as follows (noting that more detailed comments are available under the comments on the specific project components).

Briefing and debriefing meetings were held with Henrik Vistisen of the Danish Embassy. The same goes for Hong and Hoai (CIEM) and Vinh (ILSSA), and a comprehensive debriefing meeting was also held with Dr. An and Ms. Hoai (CIEM). All pending administrative and financial matters were clarified, including the approval of the DoE financial reports for the first half of 2006 (with Susanne Frederiksen from Danish Embassy), and the formulation, submission and approval of the PRG and BSPS DoE funds requests for the second half of 2006.

It was observed that overall progress of the various activities under the PRG and BSPS Component 5 projects is good. More detail is available under the individual points below, but satisfaction with the work was expressed by all parties involved. The Danish Embassy, CIEM and ILSSA highlighted that it has to be included in work programs for the future that the province level should be interacted with as much as possible. One possibility is a set of province visits when the next SME survey is launched in 2007 under the BSPS, and province staff should be invited to workshops etc as appropriate. Both Mr. Vistisen and Ms. Hong made several concrete suggestions, which will be followed.

An information meeting was held at the Danish Embassy, where component 5 staff (Finn Tarp, John Rand and Theo Larsen) briefed other BSPS components on both general and specific aspects of component 5. DoE will make available all information at hand (such as questionnaires etc) to the other components and can also respond to specific data and information requests in due course.

Ad. 2: Workshop on 6 and 7 July 2006

This workshop was held as planned under the title of ”Economic Development in Vietnam: Research Findings and Agenda”. It was opened by the Danish Embassador, H.E. Peter Lysholt Hansen and the President of CIEM, Dr. Dinh Van An. Annex 1 contains the detailed programme. A news story has been featured on the Embassy of Denmark’s website under the following links:

- - 2

English:http://www.ambhanoi.um.dk/en/menu/AboutUs/News/DanidaSupportedEconomicResearchProgrammeHighlightsTrendsAndDevelopments.htm

Danish:http://www.ambhanoi.um.dk/da/menu/OmOs/Nyheder/DanidaStoettetForskningsprogramOmVietnamsOekonomiskeUdvikling.htm

Ad. 3: Provincial profiles

At the workshop on 6 and 7 July Theo Larsen, Dr. Quang and Dr. Le Van Su presented work done so far. It is agreed that work until November will concentrate on producing one draft comprehensive study report with an overall review and with sections for each of the 10 provinces.

Theo Larsen, Dr. Quang (and Mr. Khai) and Dr. Le Van Su will collaborate on this based on the drafts already available and supplemented with new information as required with a view to finalising a consolidated draft in October of 2006. DoE will prepare and outline and after consultation and agreement work will start on putting the report together.

Ad. 4: PRG research project 1

Henning Tarp Jensen and Finn Tarp held together with Mr. Thanh a two day training on 13 and 14 July as outlined in the program in Annex 2. Due to the heavy study load, it was agreed to postpone CGE application 2 (see the program for the second day) to November.

Follow up activities under this project were also discussed and will include the following:

A GAMS course will be organized by CIEM (responsible: Mr. Thanh) with the assistance of one national consultant (one month) to be recruited under the project. Draft terms of reference for this consultant were discussed and the comments of DoE are included in Annex 3.

A national consultant (5 months) will be recruited to reinforce the economic modelling work for the remainder of 2006 (responsible: Mr. Thanh). Draft terms of reference for this consultant were discussed and the comments of DoE are included in Annex 3. It is very important that this consultant undertakes substantial activities and completes two studies to help the project and helps in acquiring the necessary data as specified in the TOR.

Ms. Hong, Ms. Hoai and Finn Tarp discussed a possible new initiative under this project to be guided by Ms. Hong on environmental issues. Finn Tarp will make tentative enquiries with his colleague Jørgen Birk Mortensen, a professor in environmental economics, until the end of August. During the CIEM visit to Denmark a joint meeting will be arranged with Hoai, Professor Mortensen, Finn Tarp and Henning Tarp Jensen to discuss possible initiatives. Meanwhile, a national consultant will be recruited under PRG project 1 to initiate work on the CIEM side, and help specifying data needs. Ms. Hong will make a first tentative inventory of data available.

The CGE training-seminar activities in November were discussed. DoE will prepare a more detailed plan over the coming couple of months.

- - 3

DoE will pursue the remaining study and documentation activities outlined in the 2006 work plan.

Ad. 5: PRG research project 2

Professors Abbott and Tarp and Dr. Huong met several times to discuss project implementation. They also met with Mr. Que of IPSARD and Ms. Nga of the Ministry of Trade. Status is as follows:

DoE will prepare the first paper referred to in the 2006 work plan on WTO and WTO accession before the end of the year. It will be based on the 6 and 7 July workshop presentation by Professor Abbott.

DoE will prepare a draft of the third paper referred to in the 2006 work plan before the end of October. It will review all studies made so far on international economic integration and WTO accession and will be circulated to Dr. Huong and others for comments and further redrafting with a view to having the final joint and collaborative study ready by the end of the year.

The second paper on the cashew sector cannot be completed in 2006. A revised work plan was agreed, and expanded TORs were developed. They are attached in Annex 4. Please note they involve field work to be implemented in 2007. Dr. Huong will keep Abbott and Tarp informed about progress.

Discussions were held on the analysis of the implications of the impending WTO accession. Plans were made for this work, which will continue into 2007, when the consultancy report of Ms. Nga on WTO commitments and negotiations and necessary data are available as discussed below. Detailed plans will be agreed in November when the 2007 annual plan is to be prepared and agreed for this area to which CIEM is paying a lot of attention as stressed by Dr. An.

Data needs for this project component were discussed in detail. They are included in the consolidated list referred to below under point 8, and it is especially to be noted that the data necessary for analysing the implications of WTO membership should be made available to the project.

Ad. 6: BSPS SME survey work

The data base is now in hand from ILSSA and work will start on the descriptive analysis and after that the policy briefs and in 2007 the analytical studies. It is understood that Dr. Le Van Su will ensure that Mr. Tam from his department will undertake to learn STATA, so he can take an active part in using the data base and contribute to analytical work.

CIEM has posted the questionnaire (both English and Vietnamese versions on the CIEM website). The draft descriptive report will be used in the workshop that is planned to be held on 27 or 28 November (together with the provincial profiles, some policy briefs etc).

Ad. 7: BSPS household survey work

- - 4

Work is progressing on the BSPS household survey in seven provinces (Ha Tay, Phu Tho, Nghe An, Quang Nam, Khanh Hoa, Lam Dong). ILSSA and DoE carefully checked all questionnaires and corrected all remaining issues. Some 400 households have been surveyed, and the process is going without difficulty.

A training workshop is being planned for November with CIEM, ILSSA and MARD’s Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD) staff headed by Dr. Dang Kim Son.

This training is possible since the Danida ASPS programme has approved that the so-called five ASPS provinces (Dac Lac, Dac Nong, Lao Cai, Dien Bien and Lai Chau) will also be surveyed with the same questionnaire as the seven BSPS provinces under a separate agreements involving ILSSA, IPSARD and DoE.

CIEM, ILSSA and IPSARD should make sure that each can send 3-5 staff with STATA skills, who can benefit from this course. It was agreed that Dr. Quang and Mr. Khai will follow-up on this in CIEM and Mr. Vinh will do the same in ILSSA. If required these staff should start practising STATA as soon as possible.

As soon as the completely finalized questionnaire is ready it should be posted on the CIEM web-site (in English and Vietnamese).

Ad. 8: Other activities and data and software requirements

During the visit a variety of other activities and support was provided by the DoE. They include:

Support in relation to the sending of CIEM staff on further advanced training abroad. The plans of Ms. Hoai and Mr. Chuc were discussed in detail, and various administrative procedures were also clarified.

Inputs to the progress report for the second quarter of 2006. Professor Tarp will join the editorial board of the Economic Management Review and will

make suggestions on a few other international professionals to invite. Plans for the CIEM visit to Copenhagen were discussed. DoE will make a programme for

the afternoon of 31 August, including as well detailed discussions on this report and the follow-up identified as regards the various projects (and the new initiative on environmental issues).

Dr Le Van Su requested background information on the Danish SME sector, which will be looked for by DoE.

Finally, software and data needs were discussed as set out below. It would be appreciated if CIEM take action with GSO and others as required.

Procurement of the GAMS modelling language. This was done during the visit and the programme is now available for the course in August and the modelling training in November.

- - 5

CIEM should get the latest version of the STATA programme. Finn Tarp will find out the version number and inform Hoai.

The official GSO VHLSS2004 data were procured during the visit, and is now available for household analysis and the training in November.

The necessary consistent set of 2004 macro data, required for running the merged model will be obtained in relation to the consultancy related to PRG project 1. Mr. Thanh is responsible for this and he has been given all the necessary data specifications by DoE. In case of any questions DoE can be consulted for advice, including in end of August during the CIEM visit to Copenhagen.

Data for WTO accession impact analysis, which include:o Times series of aggregate annual GDP and national supply and utilization balance

from approximately 1990 to 2005. Annual GDP, import, final consumption, (by government and households), gross capital formation and export should be given. Please note that investment (capital formation) should be disaggregated by FDI and domestic investment, and a separate table should show gross capital formation divided into (i) dwellings, other buildings and structures, (ii) machineries and equipments, (iii) cultivated assets, trees and livestock, (iv) intangible fixed assets, (v) changes in inventories. Exports and imports should be divided into respectively goods and services.

o Time series of annual sector level GDP and supply and utilization balance from approximately 1990 to 2005 (like the aggregate national balance but one set for each disaggregate sector in accordance with the sector specification of the GSO I/O tables, respectively 112 sectors from 2000 and 97 sectors until 1999).

o Annual time series export data (in volume and value) by sectors as mentioned above, supplemented by destination for each commodity to the following destinations: US, EU, China, Japan, South Korea, ASEAN, Australia, Rest of Asia, Africa, others). Annual export subsidies/taxes should also be provided by I/O sector and destination of export.

o Annual time series import data (as mentioned above), supplemented by origin for each commodity from the following origins (US, EU, China, Japan, South Korea, ASEAN, India, Australia, Rest of Asia, Africa, others). Annual import tariffs should also be provided by I/O sector and origin or import.

Please note data in current and constant prices should be given.

On the data needs for the WTO accession project, Finn Tarp will consult his colleagues and update the above list if required within the next two weeks. It should also be noted that the above should be seen as the first effort in a step by step building up of a comprehensive CIEM data base required for analyses under the project in the years to come.

- - 6

3. Final remarks

Work was carried out as planned in accordance with the TOR. The above report will be reviewed by CIEM and DoE during the visit of CIEM to Copenhagen.

The next visit of DoE has been planned for November. Finn Tarp will arrive 9 November and Katleen van den Broeck on 13 November. Theo Larsen and Henning Tarp Jensen are scheduled to arrive on 20 November and all will depart on 30 November. Hotel accommodation has been arranged.

During this visit a one day workshop on the SME draft descriptive report, provincial profiles, policy briefs and a first introduction to the household surveys will be organized on 27 or 28 November in addition to the household analysis course (requiring STATA) and the modelling course (requiring GAMS). Completing the national consultancies agreed is critical for the success of the project, and the same goes for acquiring the necessary data as specified.

- - 7

ANNEX 1: PROGRAMME OF WORKSHOP

“Economic Development in Vietnam: Research Findings and Agenda”

Fortuna Hotel, Hanoi, 6& 7 July, 2006

SUPPORTED BY DANIDA

6 July 200608.00-08.30 Registration08.30-09.00 Opening statements Dr. Dinh Van An,

President, CIEMH.E. Peter Lysholt Hansen, Embassy of Denmark Professor Finn Tarp, DoE

09.00-12.00 Session 1: International Economic Integration

Chair: Dr. Dinh Van An, CIEM

09.00-09.25 Vietnam’s Trade Policy Dilemmas

Dr. Pham Lan Huong, CIEM

09.25-10.05 Vietnam’s WTO Accession: Lessons Learnt from the Past

Professor Phil Abbott, DoE

10.05-10.30 Coffee break10.30-11.10 Alternative Analytical

Methods of Studying Trade Liberalization: Strengths and Weaknesses

Professor Phil Abbott, DoE

11.10-11.30 Commentator 1Commentator 2

Dr.Vo Tri Thanh, CIEMDr. Doan Hong Quang, WB&CAF

11.30-12.00 Open Discussion12.00-13.30 Lunch13.30-17.00 Session 2: Business Sector

DevelopmentChair: Mr. Dao Quang Vinh, ILSSA

13.30-14.10 Enterprise Growth and Survival in Vietnam: Did Government Support Matter?

Professor Henrik Hansen, CAF & DoE

14.10-14.20 Commentator Dr. Vu Quoc Huy, NEU14.20-14.35 Open Discussion14.35-15.15 Credit constraints in the

Vietnamese Enterprise SectorDr. John Rand, DoE

15.15-15.25 Commentator Dr. Tran Dinh Thien, Institute of Economics

15.25-15.40 Open Discussion15.40-15.55 Coffee break15.55-16.35 First results of 2005 SME

surveyDr. John Rand and Professor Finn Tarp, DoE

- - 8

16.35-16.45 Commentator Mr. Nguyen Dinh Cung, CIEM

16.45-17.00 Open Discussion

7 July 200608.30-10.00 Session 3: Macroeconomic

ProjectionChair: Professor Finn Tarp, DoE

08.30-09.10 A Macroeconomic Projection Framework for Vietnam

Dr. Henning Tarp Jensen, DoE

09.10-09.20 Commentator Dr. Nguyen Van Quy09.20-09.40 Open Discussion09.40-10.00 Coffee

10.00-.12.00 Session 4: Provincial Profiles for SME and Household Research

Chair: Dr. Dinh Van An, CIEM

10.00-10.30 Provincial Profiles: Initial Findings (1)

Mr. Theo Larsen, DoE

10.30-10.50 Provincial Profiles- Household Development: Initial Findings (2)

Dr. Chu Tien Quang, CIEM

10.50-11.10 Provincial Profiles - SME Development: Initial Findings (3)

Dr. Le Van Su, CIEM

11.10-11.40 Commentator 1

Commentator 2

Commentator 3

Mr. Henrik Vistisen, Danish EmbassyDr. Nguyen Dinh Long, MARDDr. Le Xuan Dinh, Economic Department of Communist ReviewDr.Nguyen Huu Dung, ILSSA

11.40-12.00 Open Discussion12.00-12.05 Closing remarks Dr. Dinh Van An, CIEM12.05-13.30 Lunch

- - 9

ANNEX 2: PROGRAMME OF TRAINING WORKSHOP

CIEM-Danida Training Course 13 and 14 July 2006An Introduction to Computable Equilibrium Modelling: Data and Theory

Lecturers: Henning Tarp Jensen & Finn Tarp, CIEM-Danida project

Date: 13.7. and 14.7.2006Time: 08.30 – 16.30Place: CIEM

PROGRAME:

Day 1:

08.30-08.45 Introduction08.45-09.45 SAM methodology09.45-10.15 Coffee10.15-11.30 SAM construction and data issues11.30-13.30 Lunch13.30-14.45 Introduction to the standard 1-2-3 CGE model (1)14.45-15.15 Coffee15.15-16.30 Introduction to the standard 1-2-3 CGE model (2)

Day 2:

08.30-09.45 Introduction to the standard 1-2-3 CGE model (3)09.45-10.15 Coffee10.15-11.30 CGE Application 1: Marketing costs and agricultural technology11.30-13.30 Lunch13.30-14.45 CGE Application 2: Trade Liberalization and Spatial Inequality14.45-15.15 Coffee15.15-16.30 Policy Issues, Conclusion and Next Steps

Target group: analysts working in economic research institutions or the ministries of planning, finance and similar, who would like to get an introduction to construction and use of CGE models. Participants must have a good background in economics, and the course will require full-time participation. The course will be taught in English.

- - 10

ANNEX 3: DoE COMMENTS ON TOR FOR NATIONAL CONCULTANTS TO BE RECRUITED UNDER PRG RESEARCH PROJECT 1

Consultancy 1 (1 month)

The activities are acceptable as a starting point, but we should make sure the follwing is added:

When will course be held?For how many days (half day or full day)?For how many participantsActivities: plan course, prepare examples and course notes, implement course, help with questions during two weeks after courseOutput: a report on the course with all the materials used

Consultancy 2 (5 months)

The activities are acceptable as a starting point, but we should would make sure the following is added:

- Get data for updating SAM to 2004 (macro data and household data etc) and the data for the merged modelling

- Prepare one study on policy issues faced by Vietnam (to be used in helping to describe and set up set of policy scenarios to be used in the modelling)

- Prepare one study on growth, poverty reduction and inequlity in Vietnam and prospects for the future

- Present findings in a seminar and hold meetings with project staff (national and nternational as required by the project)

- - 11

ANNEX 4: NATIONAL CONSULTANCY ON CASHEW SECTOR UNDER PRG RESEARCH PROJECT 2

Cashew Exports and Vietnamese Trade Policy

Cashew exports have expanded rapidly in Vietnam, from $100 million in 1999 to $436 million in 2004. As a result, Vietnam has become the second largest shelled cashew exporter in the world, just behind India, and increasing its market share from about 10% to about a third of the world market. Vietnamese exports to the U.S. over this period went from $ 23 million to $152 million, at the same time as the U.S.-Vietnam Bilateral Trade Agreement (BTA) was successfully negotiated. But there never have been tariffs charged by the U.S. on cashew imports. This is clearly a case where regularization of trade rules has likely facilitated expansion of Vietnamese exports. Whether foreign investment has played a role is less certain.

Cashew production is volatile and cashews are processed (shelled) in the source country using a technology that is typically labor intensive but nevertheless exhibits substantial fixed costs and so scale economies. (Several competing technologies exist.) Cashew processors as a result compete strongly for supplies, and trade policy has been used elsewhere (e.g. export bans and taxes on raw nuts in Mozambique) to subsidize processors, guarantee supplies, and stabilize domestic markets. If farmers are risk averse, and in the presence of scale economies, new trade theory argues that interventions are called for. And processing may enhance income growth as a value added activity, with its impact on poverty dependent on the technology adopted. But WTO commitments may reduce Vietnam’s “policy space” and require that second best policies be applied.

One long run goal of this project is to investigate the role of trade policy in cashew for Vietnam in light of WTO commitments. Lessons may ultimately be extended to other agricultural commodities where domestic processing could be significant (e.g. sugar, coffee and cocoa). Toward this end a better understanding of the structural and institutional characteristics of Vietnam’s cashew industry needs to be developed. The short run objectives of a consultancy on the cashew industry then would be to obtain necessary background information on cashew production, marketing, processing and trade in Vietnam.

A simplified supply chain for cashew would as a minimum include the categories mentioned below. Please provide detailed information on overlaps when for example processors are also collectors and exporters, and please explain: what is the relationship among the processors, among the exporters and among farmers. Are they competing, collaborating etc. Please also draw an illustrative diagram with numbers giving a picture of the whole system from producer of raw cashew to final consumption or export:

Farmers/producers: who are they, how many, where, size of plantation, yearly farm gate prices, annual production (area, production, yield), are farmers specialized cashew farmers or what else do they do as part of making a living (cashew income as part of total income – how much), to whom do they sell, cost breakdown including seed, fertilizer, equipment, labor etc, total earnings, specify whether family labor is used on farms or extra labor employed, why did cashew production become so attractive, what are existing challenges/problems and which problems are expected in the coming years on the one

- - 12

hand, and which opportunities are there on the other. How do farmers/producers plan to cope with challenges and utilize opportunities?

New technology (seed and cultivation technology): where do seed/plants come from, how are they introduced (does government play a role), is there a cashew extension system, how is cashew grown, how are inputs financed (self financed or through loans from input suppliers or from government, any barter with input suppliers), are activities labor intensive or capital intensive

Market: how are farm gate prices established (on contract, on the spot etc), is there a government marketing information system for farmers, what is the competition.

Other government support: do growers get credit related to cashew, does government help establish cashew production schemes (which schemes have been in effect)

Local traders/collectors: who are they (private, government, part time, full time), size of their operation, how many, history of operation in cashew industry, their costs (with breakdown such as costs of raw cashew, transportation, handling etc), how big are sales prices and profit margins, how do they collect and transport raw cashew, do they compete for raw cashew and if so how do they compete, to whom do they sell, are they specialized cashew traders or what else do they do (what is the share of cashew trading in total firm activity), why did cashew production become so attractive, what are existing challenges/problems and which problems and opportunities are expected in the coming years.

Government support: does government provide support to traders (credit, other kinds of support)

Market: how are prices agreed with processors (contract, on the spot etc), does local authorities or government intervene in this process, what is the level of competition among sellers and buyers.

Processors: who are they, how many are they, how big is their processing capacity (total and average), is capacity fully utilized, how much do they produce, are activities labor intensive or capital intensive, what is the average number of skilled and unskilled laborers and total employment in cashew processing, what are the wage rates in cashew in comparison to other industries in the locality, what output price do processors receive, where do they get raw cashew from (how much is imported and from where and how much is from local collectors), do they compete for raw cashew and if so how do they compete, costs and revenue plus profit margins, are cashew processors specialized or do they do other operations as part of their companies (what is the share of cashew activity), how much do processors export directly and how much do they sell to exporting companies, why did cashew production become so attractive, what are existing challenges/problems and which problems are expected in the coming years

Technology: what kind of technology is used, how has it changed over time, who helped in supplying new technology (where did it come from), how is quality ensured

Market: how do processors sell their output (to whom), at what price do they sell (contract, spot), does government intervene, what is the level of competition.

- - 13

Exporters: who export (private, state), how many, they sell to final user or only to international intermediate (who are these possible intermediates), profit margins, how did they find the markets, how are contracts negotiated, which countries import cashew from Vietnam, why did cashew production become so attractive, what are existing challenges/problems and which problems are expected in the coming years.

Which actors (marketing companies etc) are there in the domestic market for cashew for final consumption? Is there a lot of competition or not.

About the Cashew Association: how was it formed, who are the members, what does the association do, what support to members is provided, what kind of data do they have and/or collect.

In sum, this description of the supply chain and its steps need to be refined to reflect Vietnamese reality, and data collected on activities, prices and costs at each point along the chain. Please note, data utilized are to be secondary such as from GSO, MARD, Cashew association etc. Also primary information will be used (Huong and Que and Manh will visit cashew areas for data collection and verification), but no new survey is to be carried out.

In addition:

First, basic historical supply and utilization data on cashews in Vietnam must be collected.

Second, costs of production, processing, marketing (margins), and exporting need to be gathered. Also specify any government policies to increase or decrease margins in each step of the chain.

Third, prices at each link of the supply chain need to be independently collected.

Fourth, trade data (by destination) needs to be collected.

With this data and with available descriptive information on the cashew sector in Vietnam, a series of general questions need to be addressed:

What explains the rapid increase and success in cashew production on Vietnamese farms?

Why has processing capacity increased? Has it been coordinated with supply expansion or are supply problems for processors evident (we have heard rumors that Vietnam in some years has resorted to importing raw nuts from Africa to supply processors)?

What adaptations did the Vietnamese adopt to processing to make it cost effective in their environment?

Are any incentives or policy interventions (remember they can include tariff and tax policy but also technology, credit etc.) in place to encourage cashew production or processing?

How well integrated are Vietnamese cashew markets? Do world market prices get reflected in Vietnamese domestic prices, and if not what is the reason.

- - 14

What institutions have facilitated Vietnamese cashew exports? Has FDI played a role in this, and did the U.S. BTA influence this outcome?

Which policies have impacted (positive and negatively) on the cashew sector performance. As a suggestion have any of the following been in effect: trade policy domestic support, tariff, export subsidy/tax.

Are there pressures for policy interventions in the cashew sector, and are these policies consistent with WTO commitments?

As the very last point: we want to understand the full story behind why cashew has been a success: is it government support, is it better prices (and if so how were they transmitted to farmers), are profits high even when world price is low etc.

Please also note: any insights about the history, operation and future of the cashew sector should be added along the way also when it is only of qualitative terms, and then supported by available data (estimates) as much as possible.

- - 15