World Food Policy Volume 3, No. 2/Volume 4, No. 1, Fall16/Spring17 | Page 59

What shapes the governance of the dairy value chain in Vietnam? Insights from Ba-Vì milkshed (Hanoi) Introduction smallholder production. In 2011, 90% of all dairy cows were raised on small farms of less than 20 cows. Larger dairy farms were formed out of partially and progressively privatized state agro-for- estry farms (FCV 2011). T he economic reforms that be- gan in Vietnam in 1986 4 affected agriculture and the whole agro- food sector through land allocation to individual farmers, liberalization of ag- ricultural production, and the gradual privatization of state-owned enterpris- es (Dang 2009). The agricultural GDP grew annually by 4.2% and by 3.5% in the periods of 1986-2004 and 2005-2013 respectively. The livestock sector has been particularly dynamic with an an- nual growth of 5.3% for the 2005-2013 period and, in 2014, represented 26.4% of agricultural GDP. Pig and poultry production accounted for 90% of live- stock output (GSO 2014) 5 while milk production has increased significantly, both in terms of the national dairy herd and of the average milk yield. The dairy herd quintupled from 41,241 to 227,020 cows between 2001 and 2014, mainly on smallholder farms. During the same pe- riod, milk production augmented from 64,703 to 549,533 tons (DLP 2014) 6 . Economic growth induced higher de- mand while enabling environment favored an increase in both milk pro- duction and consumption 7 . National policies were promulgated to encourage the dairy sector, such as the Decision 167 8 supporting dairy development for the 2001-2010 period with a focus on 4 5 6 7 8 9 Despite these improvements, the dairy industry only satisfies 30% of domestic demand (DLP 2014), and the remaining demand is covered by im- ported milk powder and dairy products worth US$1,097 million in 2014 (Viet- nam Custom 2015). The new livestock development policy (2014) 9 gives prior- ity to the development of large commer- cial farms. While some authors report efforts by large dairy corporations to exclude small-scale vendors and fam- ily farms from value chains in devel- oping countries (GRAIN 2011), others highlight the complementarity between firm-led governance and contracted smallholder farmers (Humphrey and Memodovic 2006). This paper aims at characteriz- ing the governance pattern of the local dairy value chain, and linking the gov- ernance to the economic performance and development of the chain. The re- spective roles of private firms and of government in value chain governance are explored to assess current upgrad- ing trajectories and future prospects for smallholder dairy production. The ‘Đổi Mới’ (Renovation) has moved Vietnam away from a centrally-planned economy to a “so- cialist-oriented market economy” General Statistics Office Department of Livestock Production (under the Ministry of Agriculture and Rural Development (MARD)) Per capita milk consumption increased from 3.7 liters in 1995 to 20 liters in 2013 (FaoStat, 2014) Decision 167/2001/QD-TTg of the Prime Minister (26 th October 2001) MARD’s Decision n°984/QD-BNN-CN (2014) approving the “Restructuration of the livestock sec- tor towards improvement of added value and sustainable development” 59