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Inclusive Agribusiness Roundtable in Southeast Asia
Cong Binhin Long An Province
(Vietnam)
Developed by
Dr Vo Thi Thanh LocMekong Development Instute, Can Tho University
AsiaInclusive
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1.1. Young company
Cong Binh is a private company specializing inthe producon, processing and exporng ofvarious types of rice, especially so cooked
rice and aromac rice. The company was establishedin June 19, 2006 with the support of Planning andInvestment Department of Long An province andwith an inial investment of over VND100 billion.Besides rice products, the company has other by-products of rice industry such as broken rice, branand husk blocks (to be used a firewood). In the last5 years, Cong Binh received 21 domesc and inter-naonal awards and quality cerficaons.
Its current annual revenue exceeds VND1,000 billionand working capital is more than VND500 billion;Cong Binh operates on a manufacturing area ofapproximately 40,000 m² with a number of 200 staff (not farmers). Its assets include a modern system oftechnology which can perform a producon chain ofrice from drying, milling, polishing, color separaon,packaging, storing and exporng.
Cong Binh gains its compeve advantage by beingable to produce consistently and uniformly high qualityproducts. In addion, its business process related totrade and service are very effecve and operate ata reasonable cost. The company is very proacve ofinput-output processes, has an excellent reputaonand business ethics. It takes care of its customers forthe long term and invests in the development of new
markets.
1. Company background
1.2. Rapid growth
Inially, Cong Binh was just a producer of rice for
domesc consumpon. Its business has been signifi-
cantly expanding since 2009 when Cong Binh has
modernized its technology to produce higher qualityproducts, especially rice for export to take advan-
tage of Government Act 109/2010/NĐ-CP signed
4/11/2010 relang to ‘The Rice Exporng Business’
directly (not depending on Vietnam Food Associaon
– VFA). Cong Binh currently exports so cooked rice
and aromac rice to many Asian countries and other
countries around the world:
Growth rates of Cong Binh are 50% annually in terms
of turnover and 30% annually in terms of profit. Thecompany has opportunies to expand its market
share through its internaonal strategic partners.
However, it sll lacks the needed investment capital,
and has limited producon capacity to be able to
accept larger deals proposed by those partners. In
general, a lack of access to credits and loan is the most
diffi cult factor for Cong Binh to expand its scale of
business operaon.
HONG KONG
MALAYSIA SINGAPORE
INDONESIA
AUSTRALIA
TAIWAN
CHINA
UNITED KINGDOM Annual export volume
~100,000 tons
60–70%of total rice sold
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2. Working with farmers
Although the company was formed in June 19, 2006,
Cong Binh has started establishing linkages with
farmers only in 2014 due to the high market demand
for high quality products and the opportunity arising
from decree No. 109/2010/NĐ-CP, dated in Nov 4,
2010 related to rice export directly without help from
Vietnam Food Associaon (VFA) and other agencies.
Since 2014, Cong Binh has invested in developing
areas to produce types of rice, in terms of quanty
and quality that meets the requirements of export
markets. Currently, Cong Binh has investments for
linkages with farmers to produce rice at provinces
of Long An, Soc Trang, and Hau Giang. The scale for
linkages is more than 3,000 farm households with
total area exceeding 3,000 ha.
Target objects for the company’s linkages include
cooperaves (Cs), cooperave groups (CGs), and indi-
vidual farmers (F) in the selected geographical area with
natural condions suitable for growing the company's
rice variees. This opmizes the compeve advantage
of material regions to produce higher quality rice at a
lower cost compared to other regions.
2.1. Incenves to becomemore inclusive
Market development
As menoned above, Cong Binh's business has sig-nificantly expanded since 2009 aer the decree
No. 109/2010/NĐ-CP, dated in Nov 4, 2010 of the
government on ‘Rice export business’. The decree
has provided opportunies for private companies as
Cong Binh to export rice directly. Cong Binh took
that challenge and invested in an assembly line pro-
ducon technology to produce rice (the technology
comes from Japan, the company’s staff were trained,
and service available within 24 hours by the Japanese
company’s offi ce in Vietnam). Its facilies can perform,
aer harvested rice, all the required steps including
drying, milling, polishing, color separaon, packaging,
and storing for its final products. Furthermore, a
long-term goal of exporng a high quality of spe-
cialty rice, Cong Binh has been very proacve in the
analysis of the overseas rice market (staff are recruitedfrom universies and then retrained carefully from
Ho Chi Minh city and at the company also) and there-
fore the company has much valuable informaon and
knowledge to share with linked farmers about what
need to produce in terms of quality and quanty.
They are the core of the value chain producon and
distribuon with linkage models to develop it for a
long-term stable and sustainable business.
At present, total revenue and income of the company
increases annually, its total costs are sll increasing
(but the growth rate of revenue is higher than that
of costs) because there is currently an investment in
modern producon lines from Japan, costs of searching
for new markets abroad, label cost, and rice seed
from research instutes of rice in the Mekong Delta.
Cong Binh is, however, aiming for a rice specialty
with higher quality due to current market demands,
new customers and modern technology to produce it.
These costs will be decreased when the company has
stable markets (the market is developing now), which
would bring more profit in the future.
2.2. Value chain content
Cong Binh parcipates in RVT rice value chain as a
key actor for both providing input materials in kind
and cash, and buying all paddy produced by farmers.
However, Cong Binh is working in both rice linkage
and non-linkage models.
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Map of Rice Value chain without linkage model with Cong Binh in 2015
In this map of value chain, Cong Binh is one of the export companies who buys rice in the value chain (not model
linkage); the amount of rice from each company depends on its demand. Suppliers are seed companies and local input
wholesalers that the farmers buy for their producon. Cong Binh and other export companies can buy both paddy
and rice from collectors and millers along the chain. Normally, export companies including Cong Binh, have their own
collectors and millers to supply.
Map of RVT rice Value chain with Cong Binh’s linkage in 2015
In this case, Cong Binh plays a role of both input supplier and rice buyer in the value chain (concentrated model).
The diff erences of two above models are below.
INPUT
Institute/university,
Extension center, input Co.Banks
Local governments at all levels
Supplier
— Seed — Agr i.
materials
MILLING
Milling
PRODUCTION
Farmer
— CGs
TRADING
CongBinh Co.
COLLECTION
Collectors
CONSUMPTION
Whole-saler
Retailer
Domesticuser
Export
INPUT
Extension center,Input Co. & processing Co.
Bank
Cong Binh’sSupplier
— Seed — Agr i.
materials incash
MILLING – TRADINGPRODUCTION
RVT RiceFarmers inCs/CGs
Cong Binh Co.
CONSUMPTION
Export
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Comparison of differences with/without linkageswith Cong Binh
As menoned above, Cong Binh buys rice and paddy
through two channels:
1. from farmers from its own linkage model2. from collectors, traders and non-linkage farmers.
The following table show benefits of linkage model
compared to the non-linkage one. Without middle
actors, benefits are higher profit/kg of rice for farmer
and beer rice quality.
Without farmer’s linkage With farmer’s linkage (RVT rice)
Cong Binh supplies nothing to the farmer, even
link to input suppliers
Cong Binh provides RVT seed and guarantee quality
to farmers along with input materials in cash
Rice value Chain has 6 funcons and 8 actors Rice value Chain has only 4 funcons and 4 actors;farmers sell 100% of their rice producon toCong Binh directly
Cong Binh has no decision making involvement inany producon maers of farmers
Farmers produce rice according to quality proce-dures developed by Cong Binh
Farmers receive no input capital from Cong Binh Farmers receive support in terms of quality riceseeds and advanced funds as well as selling alltheir paddy to Cong Binh
Cong Binh sells many variees of rice, in whichrice export volume is between 60 and 65%, theremain percentage is for domesc users.
RVT rice export volume is 100%
Share of profit/kg to farmer is 30%, other actorsin the value chain receive 70%
Profit share to farmer and Cong Binh is 50–50%;there is nobody else in the rice chain. In this case,other actors are not related; they do their job withother variees of rice
Farmers need loans for buying their input mate-rials that cause high producon costs due to bankinterest
Cong Binh provides rice seed and cash in advancefor farmers and that is deducted aer harvesngwithout interest
1
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2.3. Extent of inclusivenessregarding linked farmers
The extent of inclusiveness has been evaluated by
using the LINK methodology (CIAT, hps://cgspace.cgiar.org/handle/10568/49606)
Chain-wide collaboraon
— In business operaons, Cong Binh has receivedsupport from various sources, including many
Decisions, Decrees and regulaons relang to
business development, exporng, and market
informaon from Chamber of Commerce and
Industry of Vietnam (VCCI), Ministry of Trade and
Industry, Ministry of Agriculture and Rural De-
velopment (MARD), the Center of Trade Promoon,
trade counselor, the Department of Agricultureand Rural Development, Department of Trade and
Industry, Department of Planning and Investment,
Department of Natural Resources – Environment,
program for business partners, program of agri-
cultural restructure and linkage program between
farmer and company, cooperave organizaons
and producon informaon. For instance, VCCI
organizes training courses or workshops related
to free trade agreements, foreign CEO business
experience, even receives feedback from business-
men to propose new policies to MARD. — Cong Binh realizes that local governments play a
very important role in developing a successful
business in linkage between Cong Binh and farmers,
cooperaves, and group cooperaves. Without
local governments, these important linkages would
not be possible because local governments help
by choosing suitable land for rice producon, CGs’
organizaon and technical support. Local govern-
ments provide support in terms of crop metable,
integrated pest management (IPM), Cs’ and CGs’
establishment, three-side contract making, moni-
toring, and managing producon and environmental
protecon procedures without payment from the
company except some money for technicians to
work more for the company’s model.
— Cong Binh also receives support from the Viet-namese embassies for introducing partners abroad
and market informaon.
— Cong Binh is a member of VCCI and follow the VCCIrules (see website: www.vcci.com), so it receives
benefits of business training and market informa-on for both domesc and internaonal segments.
— Input partners of Cong Binh include suppliers ofrice seeds and other materials, farmers, coopera-ves, group cooperaves, traders and rice millers
(they are close suppliers of Cong Binh for a longme as menoned above).
— Output partners of Cong Binh are restaurants/hotels, industrial zones, wholesalers/retailers
(domesc consumpon), and many rice importers
located in different countries.
— Local government is the third partner for modellinkage development of the company as well as
technical support.
— Research instutes help to produce and developrice seed.
New market linkages
— Cong Binh is currently linking farmers to produce4 different variees of rice: RVT, Nang Hoa,
OM4900, and OM5451 for the demand of the
export market. Of those variees, RVT is the most
significant one. RVT accounts for 40% of rice areas
and 30% of the total turnover of Cong Binh. Thecompany is currently is in a monopoly posion
regarding export of RVT rice. The reasons for extra
support (training, seed and cash) to the farmers
are to help farmers reduce producon costs (if not
farmers must pay interest to the bank to buy input
materials) and to increase awareness regarding
market requirements to help Cong Binh have stable
rice regions with high quality.
Fair and transparent governance
— The company buys all paddy produced by thefarmers at VND200 per kilogram, which is higher
than the market price at harvest me that farmers
outside the linkage model can achieve. At this
price, the benefit would provide an even split of
profit/kg, 50–50% between the farmer and Cong
Binh. Without the linkage, Cong Binh has to buy
paddy and rice through other actors in the chain
(collector, traders); in this case, Cong Binh sll
receive a profit/kg percentage of 50% (remain 20%
to collectors) but would not be able to guarantee
product quality because paddy or rice from collec-
tors is mixed many other variees of rice.
— The linkage brings to the farmer higher and stableincome significantly, especially for poor farmers
who do not normally possess enough financial re-sources to acquire input materials to grow the rice
crop. Without linkage, the farmer has to acquire
loans from banks and pay interest as well as
paying interest to input suppliers aer harvesng.
Feedback from many CGs’ leaders indicates that
linked farmers are extremely happy with this kind
of linkage of Cong Binh. The farmers are sasfied
with the stability and quality of input supply, the
technical guidance received and the guaranteed
sale of rice through Cong Binh.
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Process to ensure transparency
Step 1
Aer idenfying a potenal and suitable growing
area for RVT rice, Cong Binh works with the local
governments to iniate the linkage setup. Specifically,
Long An DARD facilitates the formaon of farmerCGs and helps them to vote and choose a Group
Leader and Vice-Leader. Long An extension centre
from DARD help farmers to follow the technical
processes required by Cong Binh, besides a salary
from the government, technicians are paid by the
company to monitor “large fields” of the company.
At present, all local governments strongly encourage
and support this kind of linkage between companies
and local farmers.
Step 2
Cong Binh signs contracts with the CGs represented
by group leader and local government – village presi-dent (three-side contract). In the contract, Cong Binh
provides RVT seed and fund for ferlizaon. For
instance, in 2014, Cong Binh supplied VND12 million
per ha to farmer for input materials. However, in 2015
Cong Binh will supply RVT rice seed (to ensure quality
of seed to the farmer) along with VND5 million per
ha in advance to the farmer for other inputs (ferlizer,
pescides); Cong Binh’s technicians and Long An
extension centre provides guidance such as crop cal-
endar, producon, monitoring; and solving problems
happening to producon procedures when needed.
The group leader then signs a contract with Cong Binh
on the farmer's behalf. The group leader receives RVT
rice seed and the cash in advance given by Cong Binh
(both cash in advance and rice seed is 100% of input
materials for rice producon). The group leaders then
distribute the seeds and funds to each farmer based
on the rice area commied by the household. The
farmer signs acknowledgments of fund and material
received.
Step 3
7–10 days before rice harvest, Cong Binh deter-
mines the price of the rice with the farmer. It is done
in CGs’ meeng. This determined price is guaranteed
to be higher than the market price by 200 VND/kg,
and this price is updated in the contract. Cong Binhalso provides bags for free to farmers to store rice
with Cong Binh informaon on the bag (farmers are
very happy with this decision because of both the
free bags and Cong Binh brand name on the the bag).
Cong Binh pays the farmers in cash aer deducng all
advanced expenses.
Equitable access to services
— Cong Binh has linkages with suppliers to ensurethat farmers can receive input materials with
quality standards at stable prices.
— Farmers belonging Cong Binh linkage model do
not need take out loans from third party asCong Binh company provides input materials in ad-
vance including rice seed and cash (VND 5 million).
So far, nobody has Cong Binh gone into compe-on with such investment of rice material areas.
Farmers outside the linkage model need to take
out loans from Agri. Bank for buying their input
materials – seed, ferlizer and pescides). They
can relavely easily access loans easily with their
land cerficaon.
Step
1
Step
2
Step
3
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3. Lessons learnt
While there are many factors for the success of
Cong Binh, the following were emphasized by the
company itself:
— Cong Binh has a well-organized work force withhigh capacity of finding overseas markets for rice
products. This is also the main reason why mar-keng expense is high (about VND 3 billion per
year although demand for this acvity is much
more, the company only uses the above amount),
along with cost of technology investment.
— Cong Binh develops its market search by parci-pang in various domesc and internaonal trade
shows and exhibions; from trade promoon
centre of Cong Binh company, through various
government agencies, local leaders and from Inter-
net searches.
— With the linkage model, Cong Binh understandsits partners (both the input and output partners).
— Cong Binh has a reasonable and fair share of profitwith farmer; direct and united communicaon
between both sides regarding linkage contract
maers witnessed by the local government.
— Group leader and sub-leader are reputable personsin the CGs. They are the most important links
to Cong Binh. They receive a payment between
VND80,000 and 100,000 for each ton of paddy
delivered to Cong Binh Site, in which they have to
pay transportaon cost about 50% of the above
payment. So the group leader’s income for thisacvity is about VND40–50,000 per ton that
makes them be very responsible and effecve in
their works.
— Cong Binh is a very capable, enthusiasc, andethical business.
From lessons of many unsuccessful linkages imple-
mented in the Mekong Delta including those done by
Cong Binh itself for other variees of rice, Cong Binh
has made significant improvements in the program
and implementaon of its RVT linkage with farmers.
Exceeding its targets, the RVT linkage has proved to
be very successful.
Rice farmers were able to increases their income and
profit. This has been more significant for poor farm
households. Farmers are obliged to sells 100% of
their paddy to Cong Binh (no side-selling is allowed).
Linkage rice meets the high quality demanded by the
market. More and more farmers desire to register to
become members of CGs belonging to Cong Binh’s
linkage so that they can enjoy a higher share of profit
(50%–50%), rather than the previous (30%–70%).
The most significant achievement in this successful
linkage model is that Cong Binh has been able to
work hand-in-hand with farmers to communicate,
listen, and make joint decisions to idenfy soluons
that are mutually beneficial to all pares – a win-win
scenario. In addion, Cong Binh shows that business
ethics, reputaon, willing to share its benefits with
farmers are very important factors for success. In re-
turn, Cong Binh expects the farmers to produce the
highest quality according to technical specificaons,
and maintain a clean environment at the same me.
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1. Direct interview by structured quesonnaires with Mr. Phan Cong Binh, General Manager/Owner ofCong Binh Company.
2. Interviews by unstructured quesonnaires with two RVT Group Cooperaves leaders:Mr. Binh (tel. 0942089100) and Mr. Bui Van Dau (tel. 01672314407) at Tan Tru, Long An Province.
3. Government Act 109/2010/NĐ-CP signed 4/11/2010 relang to ‘The Rice Exporng Business’4. Cong Binh website: hp://congbinhrice.com.vn/ was used to provide general informaon about the
company, its products, and awards etc.
References
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