What shapes the governance of the dairy value chain in Vietnam?
Insights from Ba-Vì milkshed (Hanoi)
teria. The penalty and bonus policy is
also defined by quality attributes. IDP
encourages farmers to produce quality
milk by offering premiums tied to the
milk quality and quantity. Other bo-
without written contracts. Under the
contract terms, together with techni-
cal aspects, hygiene requirements, and
respecting sanitary norms, IDP agrees
to buy all milk that meets quality cri-
Table 3: Specifications of governance patterns in the local dairy value chain
Variables Relational Governance Captive Governance
Term of relation Long-term orientation Long-term orientation
Information
exchange Frequent information ex-
change between producers and
collectors (at collecting points,
social events, etc.) The connection between dairy
farmers and processing compa-
nies is created and maintained
by a network of collectors
Enforcement
mechanism Social relations between dairy
farmers and collectors are
driven by relational linkage,
mutual trust The terms and conditions in the
contract between dairy farmers
and processing companies con-
cern the milk that is purchased
and processed
Dependence
level Inter-dependence of farmers
and collectors Inter-dependence of collectors
and processors (processing com-
panies)
Power
asymmetry Relatively balanced/symmetric
partnership between farmers
and collectors Farmers are highly dependent on
processing companies who de-
cide on the required milk quality
and purchase price.
Captain of the
chain IDP IDP
Complexity of
the transaction Tri-party milk procurement
contract Tri-party milk procurement con-
tract
Codification of
information Norms and standards to en-
sure the quality of milk to be
collected and processed Norms and standards to ensure
the quality of milk to be collect-
ed and processed
Certification trademarks are
granted to 2 local processors
(IDP and BVM)
Competences of
suppliers Improvement in technical
knowledge and economic sit-
uation thanks to training and
credit Improvement in technical
knowledge and economic sit-
uation thanks to training and
credit
Source: RUDEC’s survey (Revalter, 2014-2015)
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