Vietnam’s pepper industry adds spice to economy – Nikkei Asian Review


On the Ben Hai river in Quang Tri province, marking the old North-South Vietnam frontier. The region is a pepper-growing area (Photo: Simon Roughneen)

On the Ben Hai river in Quang Tri province, marking the old North-South Vietnam frontier. The region is a pepper-growing area (Photo: Simon Roughneen)

DONG NAI, Vietnam — Pham Duy Quang made a life-changing decision 15 years ago after growing cashew nuts and coffee since the mid-1970s on two hectares of farmland in the rolling countryside 80km north of Ho Chi Minh City.

It was then that the former South Vietnamese soldier tore out his coffee and cashew plants, and replanted the fields with pepper. He believed peppercorns would prove to be a more lucrative crop and would make the four-year wait for his first harvest worthwhile.

“It was not an easy start. When we started growing pepper, the Vietnamese government did not have any support program for these agricultural products. Sometimes, our pepper crops were lost due to fake fertilizer and pesticides, disease and bad weather. We had to find our own way and learn from experience after years of growing them,” said Pham, who is 63.

Despite the years of trial, error and disappointment, it turned out that Pham made the right decision. Nine neighbors soon joined him and the village eventually attracted the attention of traders and buyers in Vietnam’s booming pepper industry as the country became the world’s top pepper exporter, displacing traditional pepper producers Indonesia and India, which mostly grow their crop for domestic consumption.

Describing the tireless and often innovative efforts of thousands of small pepper farmers across the country, Nguyen Mai Oanh, vice chairman and secretary general of the Vietnam Pepper Association, said “farmers have tried to earn income to escape poverty. They have learned and apply new technologies day by day.”

Success in numbers

To increase their productivity and to lighten the workload, Pham and his neighbors agreed to cooperate instead of competing against each other. They pooled money to build a small power station to pump water for their crops, replacing the generators each farmer had operated separately on their own plots. The farmers also financed the construction of a small road crossing their farmlands that linked the village to a nearby main road, enabling pepper buyers to visit more easily.

Vietnam’s pepper exports amounted to about 133,000 tons in 2015. The Vietnam Pepper Association predicts that production could increase by a further 10% in 2016.

Measured by weight, this amounts to only a tenth of Vietnam’s coffee production. Vietnam is the world’s second biggest coffee exporter after Brazil.

But the export price of Vietnam’s coffee is now around $1,400 a ton, much less than pepper, which has ranged from $7,500 to $9,500 per ton over the past two years.

About 85,000 hectares of land in Vietnam is now planted with pepper and this is expected to rise to 100,000 hectares in the next few years. On the downside, once the newly planted fields bear fruit after three or four years, the increased yield is likely to drive down prices.

Future of coffee

Vietnam currently has 650,000 hectares of coffee plantations, but that is expected to drop by 50,000 hectares in 2016 as farmers switch to more lucrative crops including pepper, just as Pham did 15 years ago.

Despite the country’s transition to a manufacturing economy and an annual growth rate of nearly 7% in 2015, Vietnam remains a relatively poor country, meaning that lucrative crops such as pepper are vital for farming families who want to improve their lives.

Vietnam’s gross domestic product of about $170 billion in 2015 is about the same size as New Zealand’s. But with 94.3 million people compared to New Zealand’s 4.4 million, Vietnam has a much lower GDP per capita of just $2,000 per head in a country where, as of 2013, 47% of the workforce was employed in agriculture.

Spice and fortune

For centuries, spices were key to the economic and trade links between Europe and Asia, bringing prosperity to Italian traders and Southeast Asian kings in the centuries before European countries decided to colonize the region to take direct control of the spice trade, including pepper along with more exotic ingredients.

But now it is local growers such as Pham who are making a solid living from the sometimes gruelling work. Pepper harvesting means nimbly climbing up vines as high as 4 or 5 meters to pluck the pepper berries before drying them into peppercorns.

Pham notes proudly that his years of toil funded his children’s education in Ho Chi Minh City, where most of his family now lives.

Most young rural Vietnamese prefer to migrate to work in the expanding industrial zones around Vietnam’s biggest city rather than work on farms where temperatures can hit 36 C during harvest time.

But Vietnam’s pepper boom makes it worthwhile for two of Pham’s sons to take time off from their desk jobs in Ho Chi Minh City to help their father with the harvest, as he finds it difficult to recruit enough short-term help.

“I need at least 15 people to harvest the crops during a month, but I could only hire six this year,” Pham said.

Pham wants to improve his farm and retain what is now a relatively comfortable rural lifestyle – a vast improvement compared with the trauma of the Vietnam War and the years of hardship under the doctrinaire communism imposed by the victorious North Vietnamese forces up to 1986, when an economic reform program was introduced by the ruling Communist Party.

Increased productivity and rising prices helped Pham’s income to quadruple between 2010 and 2015. He put the money to good use — building a new 130-sq.-meter house on 500 sq. meters of land located 7km from the precious pepper vines that made it all possible.

The house is a gathering place for his six children and dozens of grandchildren when the extended family gets together, such as during Tet, the Vietnamese New Year, when millions of Vietnamese leave the country’s big cities for a week or more and visit their home villages in the countryside.

“I’ve spent 1.5 billion dong ($67,000) for my own new house thanks to the savings from pepper crops,” Pham said.

TPP benefits

Farmers such as Pham should be in a good position to increase their income in coming years. Around half of Vietnam’s pepper exports go to Europe and North America — a share that could increase once Vietnam’s free trade agreement with the European Union comes into force and if the 12 countries that joined the U.S.-led Trans-Pacific Partnership trade agreement ratify the deal.

Of the other 11 countries that have signed the TPP, only Malaysia is a pepper grower. But with Malaysia’s pepper production less than a fifth of Vietnam’s, the TPP should see Vietnam’s pepper boom continue without any immediate competition.

“The high value added in the American market will be the motivation to push the Vietnam pepper industry to improve,” said Nguyen Mai Oanh.

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