Vertical and Horizontal Coordination in Developing Countries’ Agriculture: Evidence from Vietnam and Implications

Abstract

Despite policy reforms and the integration of various linkages in rice production by the Vietnamese government, small-scale farmers' (small farmers’) access to the market is limited. A value chain link is a powerful tool for improving small farmers' market access and competitiveness. The benefits of horizontal and vertical coordination on farm household performance were investigated using a dataset of 160 farmers. Twenty-two stakeholders were also directly interviewed to analyze the value chain and farmers' access to markets in the Mekong River Delta, where 75% of people live in rural areas and contribute to 90% Vietnam's total rice production. According to our findings, farmers' profits are higher than in the past and total chain economic value is more efficient when farmers participate in vertical or horizontal coordination. Logit regression revealed that the determinants of farmers' decision to participate in cooperatives are training and expected benefits obtained from cooperatives. As a result, collective actions, such as contracting firms and cooperative engagement, are required to assist farmers in accessing the market. The findings also show that participation in value chain links, coordination, and integration benefits food companies significantly. However, financial assistance and insurance are required to adequately cover farmers' production costs and secure contract firms. Furthermore, a written contract should be made to strengthen the value chain. Cooperatives or farmers' organizations can be used as intermediaries to improve vertical and horizontal coordination by establishing links between small farmers and other market stakeholders.