World market integration of Vietnamese rice markets during the 2008 food price crisis

Abstract

World market prices of rice have been subject to large fluctuations in recent years. In mid 2008, prices reached levels never seen before. Vietnam is a major exporter of rice and rice is also the main staple food of the country. Given the importance of rice for domestic food security, the Vietnamese government is intervening in its international trade by limiting exports in order to insulate domestic consumers from price hikes in the world market. The effects of these policy interventions on price transmission from international to domestic markets were investigated in this study. We analyzed the marketing chain of rice in Vietnam, constructed a multivariate vector error correction model for markets across the country and included a policy parameter as well as an international reference price. We found reasonable cointegration of most markets analyzed and only a limited effect of the applied export policies: they suppressed the price in the main producing region, the Mekong Delta, but did not significantly affect the prices in the main deficit regions of North Vietnam. From a food security perspective, it is likely to be more efficient to implement food security programs and public safety nets that are directly targeted at the poor, rather than attempting to insulate the whole country from the world market.