Distribution systems of Vietnam’s agricultural products lack a solid connection because production remains fragmented and companies are reluctant to bring products to domestic distribution systems.

Thus, the restructuring of the agricultural product distribution and retail system in the agricultural restructuring scheme are creating real headaches for many businesses and policymakers.

Chairman of the Vietnam Confederation of Agriculture and Rural Development and former Deputy Minister of Agriculture and Rural Development Ho Xuan Hung spoke with the Vietnam Business Forum about this issue.

*Many experts attribute the gradual loss on home ground of Vietnamese agricultural producers and processors to their disregard toward domestic distribution systems like supermarkets and trade centres. What is your opinion about this?

It’s correct. Most agricultural product processors make light of supplying goods to the domestic distribution systems. In fact, 95 percent of products gear for exports.

Obviously, both sellers and buyers of agricultural products are hardly satisfied with the distribution and retail systems. Sellers see their products undervalued, particularly during harvest time. Meanwhile, buyers are much concerned about the insufficient quality control over agricultural products. Thus, we obviously lack timely and satisfactory response to the needs of both sellers and buyers.

Second, we are unable to stabilise prices at the time of sudden changes in supply and demand, caused by bad weather or public holidays, for instance. Prices of many food crops and agricultural products rise dramatically during such times. Hence, buyer sentiment is strongly affected by sudden price changes.

Third, Vietnam has two types of distribution and retailing systems, that is, centralised systems via supermarket chains and retail stores, and scattered systems like vending and peddling sale to household doors.

The second case causes much difficulty for quality, measurement and packaging management and control. This also gives the chance for foreign supermarkets to build and develop goods-selling systems where label, information and weight are accurate and sufficient. They also provide delivery to home and online selling services. And another shortcoming is we lack means and facilities to support distribution and retailing systems.

*Do you think domestic distributors and retailers see these inadequacies?

In fact, domestic retailers have, to a certain extent, recognised those shortcomings but they lack solutions to address them thoroughly. For example, Vietnamese-run wholesale markets, supermarket chains and commercial centres have been set up but they have not met consumers' high expectations in terms of quality, price and service.

In the long term, we need to understand that the demand for agricultural products is essential and indispensable in all circumstances. The organisation of distribution and retailing systems has, and will, exist in the long term.

In Vietnam, the profit margin of distribution and retailing systems may reach 20 - 30 percent, even up to 50 percent, on product value. Therefore, we need a long-term and continuous look on the investment for agricultural product distribution and retailing systems to not only promote economic flows but also grasp the opportunity of taking higher profitability.

*So, could you tell us what long-term and continuous investment in the sector will look like?

We should encourage private enterprises to take part in distribution and retail systems with their new approaches and regard distributors and retailers as recognised professional careers becau se, in fact, most of agricultural product distribution and retailing systems in market economies are run by the private sector like in Australia and Israel.

In the meantime, private enterprises in Vietnam are also very strong and they need to be gathered although this work requires very professional as well as specific standards of knowledge, expertise and capability to gather and organise supply stable sources of big volume, and good quality to be able to stabilise prices in all situations.

Now, we very much need the strong hand of powerful State-run enterprises to produce, distribute or cooperate with farmers to retail agricultural products with best costs.

*What about the role of authorities in restructuring of this distribution and retailing system?

Authorities need to promote fair and equal competition in distribution systems.This will be key for fundamental changes of Vietnam’s agricultural product distribution and retailing systems in new conditions.

Specially, we need to encourage individuals and organisations to establish international networks to distribute and retail Vietnamese agricultural products to other nations instead of going through foreign intermediaries.-VNA