What shapes the governance of the dairy value chain in Vietnam?
Insights from Ba-Vì milkshed (Hanoi)
Besides the proximity of col-
lecting points and milk producers,
processing facilities have been built in
the district to ensure just-in-time pro-
cessing. Collection points of indus-
trial processors are installed along the
main roads to enable access by big tank
trucks, whereas the collection points of
semi-industrial processors settle farther
away. While most of dairy farmers de-
liver their milk to the collection points
within their village, some farmers fetch
milk to collection points of another vil-
lage because of social connections. The
social proximity reduces uncertainties
related to price, quality, and quantity
while enables access to informal credit,
information, and knowledge.
when the contract ends. Thus, financial
and moral aspects as well as interper-
sonal proximity enforce the contract.
Trust between farmers and collectors
is sustained by other supports: credit
at low interest rates to farmers to buy
cows or to build facilities (VND 20-50
million 12 for a term of 6 to 12 months
with extension possibility), or advanc-
es (VND 1-3 million) for the purchase
of feed, which farmers can reimburse
in milk. Since farmers find it difficult
to access to formal credit provided by
banks (due to the high interest rate, ab-
sence of mortgages or collateral assets
such as Red Book 13 ), financial support
from collectors has largely contrib-
uted to the local dairy development.
Connections between collectors and
farmers hang on social principles and
on events taking place in the villages
and communes (weddings, funerals,
house-warming, religious events, etc.).
Milk collectors strengthen their rela-
tionship with farmers by buying milk
of lower quality rejected by the proces-
sors (in this case, milk is bought at a
lower price for feeding young calves),
delivering veterinary services free of
charge, providing technical assistance
and information or giving bonuses for
milk delivered. These incentives are
regarded as tools for collectors’ trans-
actional assurance and improving milk
quality (Saenger et al. 2013). Other at-
tributes of relational governance are
evidenced by frequent information
exchanges between dairy farmers and
milk collectors. Any changes in the
policy or strategy of processing compa-
Collectors bridge farmers and
companies through formal contracts.
The bilateral contracts between farm-
ers and processors refer to the collec-
tor’s name and are signed at collector’s
place. As the collector is responsible
for managing and enforcing the con-
tracts, actors consider those contracts
as “tri-party” agreements. Beside terms
regulating rights and responsibilities of
farmers and processors, the contract
defines different tasks performed by
the collector (delivering milk to the
factory, sampling milk for quality test,
proceeding payments, etc.). However,
the one-year term implies contractu-
al ties not being the only institution
to ensure the regularity of milk deliv-
ery and the loyalty of the producers.
There is always a risk that a farmer will
switch from one collector to another
12 Equivalent: US$1,000–US$2,500
13 “Red Book” is the Land Use Right Certificate delivered by local administration
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