VALUE CHAIN STUDY FOR SEA GRASS IN NGA SON …Value Chain Study for Sea Grass in Thanh Hoa Province,...

Value Chain Study for Sea Grass in Thanh Hoa Province, Viet Nam

Crafting out of poverty

VALUE CHAIN STUDY FOR SEA GRASS IN NGA SON DISTRICT, THANH HOA PROVINCE, VIET NAM

NOVEMBER 2010

Prepared by: Nguyen Anh Phong National Consultant Alfons Eiligmann International Consultant

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While efforts have been made to verify the information contained in this document, the International Trade Centre (ITC) cannot accept responsibility for any errors that it may contain. The views expressed in this report can in no way be taken to reflect the official opinion of the MDG Achievement Fund, the Viet Nam Trade Promotion Agency VIETRADE, the Viet Nam handicraft exporters association VIETCRAFT and ITC. The usual disclaimers regarding responsibilities apply to this report.


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PREFACE This value chain study is prepared by the International Trade Centre (ITC) within the context of the joint programme entitled ‘Green Production and Trade to Increase Income and Employment Opportunities for the Rural Poor’. Viet Nam has achieved impressive economic progress since the doi moi (renovation) process was launched in 1986. Since 1993, real GDP growth has averaged 7.5% per year and the poverty rate has been reduced from 58% in 1993 to 13% in 2008. Growth has been driven by accelerated international integration, market liberalization and job creation in the private sector. However, persistent inequalities and poverty remain, particularly in rural areas where more than 90% of the poor reside. In many areas, the income generated from farming is not sufficient for smallholder farmers to reach an income level above the national poverty line of VND 200,000 per capita/per month. Against this background, the joint programme works to increase income and employment opportunities for raw craft material growers/collectors and grassroots handicrafts and furniture producers. The collection and processing of natural raw materials from forest areas and handicraft production constitute the most important sources of additional income for rural households. In fact, it is very often the additional income generated from handicraft production or the collection of raw material that determine whether rural households can lead a life above the national poverty line. The programme targets about 4,800 poor farming and craft-producing households in four northern provinces of Viet Nam: Thanh Hoa, Nghe An, Hoa Binh and Phu Tho. These provinces were selected due to: (i) the high incidence of poverty, especially among ethnic minorities; (ii) the concentration of raw materials and local production of crafts; and (iii) the possibility to build synergies with past and ongoing development activities Within the four targeted provinces, the programme will focus on the five following value chains: (i) bamboo/rattan; (ii) sericulture and weaving; (iii) sea grass; (iv) lacquer ware; and (v) handmade paper. The programme’s approach is to develop better integrated, pro-poor, and environmentally sustainable “green” value chains, enabling poor growers, collectors and producers to improve their products and link them to more profitable markets. The complex challenges faced by the five value chains, ranging from sustainable raw material production, entrepreneurial skills development and cleaner production to market linkages and trade information deficits, can best be addressed by a joint programme which combines the core competencies of the relevant UN agencies: UNIDO, FAO, ILO, UNCTAD and ITC. The authors would like to thank Mr. Ngoc Le Ba, Vice Chairman of the national handicraft exporters association VIETCRAFT for his advice and guidance during the preparation of the report. Lastly, the authors would like to thank all sector stakeholders, including farmers, household craft producers, companies, and officials in Thanh Hoa province for making their time available to the study team and openly sharing their knowledge and views. The joint programme is is funded under the Thematic Window ‘Development and the Private Sector’ of the MDG Achievement Fund. The ‘Development and the Private Sector’ Window seeks “to facilitate the achievement of the MDGs through interventions that promote the development of private sector, through enabling policy frameworks, the growth of inclusive markets and the establishment of pro-poor public-private partnerships that create and sustain decent and productive employment.” For further details on the present study, please contact Mr. Koen Oosterom, Senior Technical Adviser, at: [email protected] or [email protected].

mailto:[email protected]

mailto:[email protected]


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LIST OF ABBREVIATIONS AND ACRONYMS

DARD Department of Agriculture and Rural Development

DOIT Department of Industry and Trade

FAO Food and Agriculture Organization

GDP Gross Domestic Product

GSO General Statistic Office

GTZ German Technical Cooperation

HRPC Vietnam Handicraft Research and Promotion Centre

ILO International Labour Organization

ITC International Trade Centre

JP Joint Programme

JICA Japan International Cooperation Agency

UN United Nations

UNIDO United Nations Industrial Development Organization

UNCTAD United Nations Conference on Trade and Development

VIETCRAFT Viet Nam Handicraft Exporters Association

VND Vietnamese Dong


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TABLE OF CONTENTS

Page

I. INTRODUCTION ....................................................................................................................... 7

I.1 DESCRIPTION OF PROGRAMME INTERVENTION AREAS ........................................................................... 7

I.2 MAJOR SOCIO-ECONOMIC STATISTICS ................................................................................................ 8

I.3 DESCRIPTION OF DIRECT PROGRAMME BENEFICIARIES .......................................................................... 8

I.4 SCOPE AND COVERAGE OF THE STUDY ................................................................................................ 9

II. MACRO ECONOMIC CONTEXT ................................................................................................ 11

II.1 OVERVIEW OF SEA GRASS PRODUCTION IN VIET NAM ......................................................................... 11

II.2 SEA GRASS PRODUCTION IN NGA SON DISTRICT ................................................................................. 13

III. VALUE CHAIN ANALYSIS ..................................................................................................... 16

III.1 DESCRIPTION AND QUANTIFICATION OF VC ACTORS ........................................................................... 16

III.2 ECONOMIC ANALYSIS OF THE VALUE CHAIN ....................................................................................... 20

III.3 CONSTRAINTS ANALYSIS ................................................................................................................. 23

III.4 SOCIO-ECONOMIC PARAMETERS (GENDER, WORK AND LABOUR STANDARDS) ........................................ 28

III.5 ENVIRONMENTAL CONCERNS .......................................................................................................... 29

III.6 MESO LEVEL SUPPORT INSTITUTIONS AND OTHER PROJECTS ................................................................. 29

IV. VALUE CHAIN UPGRADING STRATEGY ................................................................................. 31

IV.1 MARKET OPPORTUNITIES AND COMPETITIVE ADVANTAGE ................................................................... 31

IV.2 SWOT ANALYSIS ............................................................................................................................ 32

IV.3 VISION ........................................................................................................................................ 33

IV.4 SUGGESTED FACILITATION ACTIVITIES ............................................................................................... 35

V. RECOMMENDATIONS ......................................................................................................... 37

VI. APPENDICES ....................................................................................................................... 38

APPENDIX 1: LIST OF INTERVIEWEES IN NGA SON DISTRICT ................................................................................... 38

APPENDIX 2: PROJECT AREAS PROFILES (2009) .................................................................................................. 39

APPENDIX 3: PROGRAMME COVERAGE AREA .................................................................................................... 40


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LIST OF FIGURES

FIGURE 1: MAP OF NGA SON DISTRICT .......................................................................................................... 13

FIGURE 2: SEA GRASS VALUE CHAIN IN THANH HOA PROVINCE .......................................................................... 17

FIGURE 3: VALUE ADDITION OF PRODUCING A MAT OF A PRICE OF VND 55,000/PIECE

(3 KG DRIED SEA GRASS PER MAT) ................................................................................................ 201

FIGURE 4: VALUE ADDITION OF PRODUCTION OF A MAT OF A PRICE OF VND 250,000/PIECE

(6 KG OF DRIED SEA GRASS PER MAT) .............................................................................................. 22

FIGURE 5: VALUE ADDITION OF PRODUCING A SEA GRASS HANDBAG FOR EXPORT TO FRANCE

(0.3 KG OF DRIED SEA GRASS PER BAG) .......................................................................................... 223

FIGURE 6: CONSTRAINTS AT MICRO LEVEL ...................................................................................................... 28

FIGURE 7: CRITICAL POINTS AT MESO LEVEL SUPPORT INSTITUTIONS ................................................................. 30

FIGURE 8: VISION FOR THE SEA GRASS VALUE CHAIN IN NGA SON ...................................................................... 34

LIST OF TABLES

TABLE 1: POPULATION SIZE AND POVERTY RATE BY THE YEAR 2008 ..................................................................... 8

TABLE 2: LIST OF TARGETED DISTRICTS AND COMMUNES ................................................................................... 8

TABLE 3: SEA GRASS PRODUCTION IN VIET NAM 2001-2008 ............................................................................ 11

TABLE 4: CLASSIFICATION OF SEA GRASS PRODUCTS ....................................................................................... 12

TABLE 5: EXPORT TURNOVER AND VOLUME OF SEA GRASS HANDICRAFTS FROM VIET NAM .................................... 13

TABLE 6: QUALITY OF SEA GRASS IN DIFFERENT LOCATIONS ............................................................................. 31

TABLE 7: SWOT ANALYSIS.......................................................................................................................... 33

TABLE 8: UPGRADING SOLUTIONS............................................................................................................... 35


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Programme Areas

I. INTRODUCTION I.1 Description of Programme Intervention Areas

The programme is implemented in four provinces in the North of Viet Nam: Thanh Hoa, Nghe An, Hoa

Binh and Phu Tho. These provinces were selected due to: (i) the high incidence of poverty, especially

among ethnic minorities; (ii) the concentration of raw materials and local production of crafts; and (iii)

the possibility to build synergies with past and ongoing development activities.

Phu Tho is a mountainous midland province situated at

80 km northwestern of Hanoi, and encompassed by Vinh

Phuc and Hanoi to the East, Son La province to the West,

Hoa Binh province to the South, and Yen Bai and Tuyen

Quang provinces to the North. The province has fairly

advantageous conditions of transport: With the pass-by

of three great rivers; Hong river, Lo river and Da river;

with Hanoi-Lao Cai-Con Minh railway route; and inland

travel on National highway No. 2 and Asian highway

which bridges China to Viet Nam and ASEAN member

countries.

Nghe An is located at the heart of Northern Central

region, on the North-South transport route and Asian

East-West corridor. It is 300 km south of Hanoi. Following

the Road No. 8, it is 80 km from the Viet Nam-Laos

border and about 300 km from the Laos-Thai border.

Nghe An is integrated into all types of national transport:

Inland road, railway, waterway, airway and seaway.

Having 419 km length of land border and 82 km coast,

the province also has the Vinh airport, the Cua Lo port,

and the entire infrastructure is under improvement,

extension and new construction.

Hoa Binh was re-established in October 1991, sharing border with Hanoi and being the cross-section

amongst northwestern provinces, the Red river delta and the economic hub triangle Hanoi-Hai Phong-

Quang Ninh on the inland transport with a good road network (National road No. 6, Ho Chi Minh trail,

National road 12B, National road 15) and river transport (on Da and Boi rivers).

Thanh Hoa is the northernmost province of the Central region, at 150 km south of Hanoi, 1,560 km

north of Ho Chi Minh City. It shares borders with Son La, Hoa Binh, Ninh Binh to the North, Nghe An

province to the South, Hua Phan of Lao PDR to the West and North gulf to the East. The province has

good access to the transport network through the North-South railway, Ho Chi Minh trail, national

roads: 1A, 10, 45, 47, and 217; Nghi Son deep port and river system which eases the North-South

waterway transport within the province as well as to the Central region and the international


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transport. Currently, Thanh Hoa has built the Sao Vang airport and is planning to build another

international airport nearby the sea to serve the Nghi Son economic zone and tourism demand.

I.2 Major Socio-economic Statistics

According to the most recent figures presented in Table 1, the average GDP per capita in 2008 in all

four provinces was lower than the national level of 17,180,000 VND. Of the four provinces, Phu Tho has

the lowest GDP per capita. The statistics also show that the percentage of poor households in the four

provinces is higher than that the country’s average level of 13% in 2008 (based on the national

standard for poor households regulated by the Decision 179/2005/QD-TTg dated 08/07/2005, for

which households living in rural areas with equal or less than 200,000 VND/per capita/month are

considered to be poor households).

Table 1: Population size and poverty rate by the year 2008

Provinces Population No. of households GDP per capita

(VND)

% of poor

households

Phu Thọ Province 1,364,522 274,908 8,842,097 18.41

Hoa Binh Province 788,274 174,198 13,090,660 19.34

Thanh Hoa Province 3,405,000 746,428 10,295,558 21.15

Nghe An Province 2,919,214 758,333 10,490,458 17.54

Source: The 2008 statistical year books of 4 provinces.

I.3 Description of Direct Programme Beneficiaries

In collaboration with the provincial authorities, 4,822 poor farming and crafts producing households

have been selected in the four targeted provinces as direct programme beneficiaries. Criteria for their

selection included poverty, current activity in the value chain, women and ethnic minority.

The list of 25 targeted communes is shown in Table 2. These communes belong to 14 districts of the

four provinces. Tentatively, the programme will implement promotion activities for 5 value chains in

these 25 communes, with the grouping of communes as follows: 12 communes in the bamboo and

rattan value chain, 8 communes in the sericulture value chain, 2 communes in the sea grass value

chain, 2 communes in the lacquer value chain and 1 commune in the handmade paper value chain. Of

the 25 targeted communes, 15 are undertaking Phase II of the national Programme 135.

Table 2: List of targeted districts and communes

Province No. District Commune

Under

Programme

135

Value chain Number of

beneficiaries

NG

HE

AN

PR

OV

INC

E

1 Quy Chau

1 Chau Tien Yes Sericulture 110

2 Chau Hanh Yes Sericulture 60

3 Chau Thang Yes Bamboo/Rattan 150


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Province No. District Commune

Under

Programme

135

Value chain Number of

beneficiaries

2 Nghia Dan 4 Nghia Hoi Yes Bamboo/Rattan 100

3 Quynh Luu 5 Quynh Trang No Bamboo/Rattan 80

6 Quynh Thach No Bamboo/Rattan 180

4 Dien Chau 7 Dien Van Yes Bamboo/Rattan 150

8 Dien Kim No Sericulture 174

5 Yen Thanh 9 Kim Thanh Yes Bamboo/Rattan 50

10 Lang Thanh No Bamboo/Rattan 120

THA

NH

HO

A

6 Nhu Thanh 11 Hai Long No Bamboo/Rattan 311

7 Nong Cong 12 Thang Binh No Bamboo/Rattan 200

13 Tan Tho No Bamboo/Rattan 199

8 Nga Son 14 Nga Tan Yes Sea grass 431

15 Nga Thai Yes Sea grass 260

9 Thieu Hoa 16 Thieu Do No Sericulture 193

HO

A B

INH

10 Luong Son 17 Lien Son Yes Bamboo/Rattan 604

18 Hop Hoa Yes Handmade paper 250

11 Tan Lac 19 Tan Lac No Sericulture 50

12 Mai Chau 20 Na Phon No Sericulture 100

21 Pa Co Yes Sericulture 50

PH

U T

HO

13 Tam Nong 22 Tho Van Yes Lacquer ware 180

23 Di Nau Yes Lacquer ware 120

14 Cam Khe 24 Tinh Cuong Yes Sericulture 200

25 Yen Tap Yes Bamboo/Rattan 500

TOTAL 4,822

It should be noted that 41% of the selected direct beneficiaries are considered as poor, in accordance

with the official national poverty line of 200,000 VND/per capita/month. As this percentage is

significantly higher than the general percentage of poor in the 4 provinces (see Table 1), it can be

considered that the programme is indeed pro-poor. In addition, 1,432 beneficiaries from ethnic

minorities have been included in the list of beneficiaries, representing Thai, Muong and H’mong.

Handicraft production also strengthens the economic position of women particularly, who are involved

in many stages of handicraft production in the five different value chains.

I.4 Scope and Coverage of the Study

Contributing towards the realization of JP Outcome 1: “Improved understanding of the handicrafts and

small furniture value chains in four provinces”, five value chain studies are prepared, one for each

value chain identified for the programme: (i) bamboo/rattan; (ii) sericulture and weaving; (iii) sea grass;

(iv) lacquer ware; and (v) handmade paper.


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The present value chain study covers the sea grass value chain and includes:

A presentation of key macro-economic framework data;

An analysis of the main value chain actors from raw material supply to the international market

and support organizations at meso level;

An assessment of the strengths and weaknesses of the different actors and income generation

along the chain;

An identification of competitive advantages and market opportunities;

The development of an intervention strategy for value chain upgrading and value-addition,

with the view to enhance income generation along the respective value chains.


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II. MACRO ECONOMIC CONTEXT II.1 Overview of Sea Grass Production in Viet Nam

There are five species of sea grass in Viet Nam, namely (1) sea grass with white flower (“Coi bong

trang” in Vietnamese or Cyperus tojet Jormis); (2) sea grass with brown flower (“Coi bong nau”-

Cyperus Coxym bosus); (3) three-sided sea grass (“Coi ba canh” or Cyperus nutans); (4) sea grass with

black-spotted flower (“Coi dau ruoi”); and (5) “Coi ke”.

Due to the favorable climate conditions, sea grass has been cultivated widely along the Vietnamese

coastal provinces. The total sea grass area of the whole country was 12,523 ha in 2008, with an

average yield of 8.7 tons/ha. Thanh Hoa (Nga Son, Quang Xuong) and Tra Vinh are the major supply

areas of sea grass.

The quality of sea grass differs from province to province, even for the same species. Thanh Hoa is

today the major production area of the country. Its cultivation area covers around 5,000 ha and the

total production is about 40,000 tons per year. The sea grass in Nga Son district in Thanh Hoa province

is considered to be the best, especially the sea grass in Nga Tan Commune.

Table 3: Sea grass production in Viet Nam 2001-2008

No. Province 2001 2007 2008

ha tons ha tons ha tons

Northern region 1,400 11,600 1,670 11,525 695 5,204

1 Hai Phong 100 400 20 160 20 141

2 Hai Duong 100 500 - - - -

3 Nam Dinh 200 2,400 385 2,703 180 1,350

4 Thai Binh 200 2,500 300 2,100 159 1,193

5 Ninh Binh 800 5,800 965 6,562 336 2,520

Central region 4,600 32,400 6,202 43,955 6,005 42,780

6 Thanh Hoa 3,800 27,500 5,522 40,000 5,520 39,965

7 Nghe An 200 800 65 390 65 455

8 Ha Tinh 100 1,000 100 700 120 780

9 Quang Nam 200 1,400 315 1,890 130 715

10 Binh Dinh 200 1,300 50 300 50 325

11 Khanh Hoa 100 400 150 675 120 540

Southern region 3,400 20,100 5,928 44,520 5,823 60,829

12 TP HCMinh 200 1,000 - - - -

13 Long An 600 3,500 474 3,792 410 3,895

14 Dong Thap 300 1,700 258 1,714 170 1,122

15 Tien Giang - - - - - -

16 Vinh Long 1,200 7,500 703 5,624 455 4,550


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No. Province 2001 2007 2008

ha tons ha tons ha tons

17 Ben Tre 200 1,700 400 2,800 310 2,790

18 Kien Giang 300 1,700 30 210 30 285

19 Hau Giang 100 100 80 730 700 7,700

20 Tra Vinh 200 1,800 3,533 26,400 3,500 38,500

21 Bac Lieu 100 300 200 1,500 150 1,125

22 Ca Mau 200 800 250 1,750 98 862

Whole country 9,400 64,100 13,800 100,000 12,523 108,813

Source: Statistic book of Viet Nam

On average, 30% of the Vietnamese sea grass is used for domestic craft and household goods

production. The other 70% is exported to neighboring Asian countries, particularly China. Nowadays, in

line with international trends towards a green life using eco-friendly products, natural fibers such as

sea grass are favorite materials for many manufacturers worldwide.

There are no specific trade statistics available on handicrafts made from sea grass. However, as sea

grass belongs to the product group of bamboo, rattan, and leaf etc., which falls under the Harmonized

System Codes (HS codes) 4601.20, 4602.10, 4602.90, 6504.00, 9401.50, 9403.80 and 1401.90 (Table 4),

trade in sea grass products can be tracked approximately in Table 5.

Table 4: Classification of sea grass products

No. H.S Codes Description

1 4601.20 Mats, matting and screens of vegetable plaiting materials.

2 4602.10 Of vegetable material

3 4602.90 Made up from other plaited materials

4 6504.00 Hats and other headgear, plaited or made by assembling strips of any material

whether or not lined or trimmed.

5 9401.50 Seats of cane, osier, bamboo, or similar materials

6 9403.80 Furniture of other materials (including bamboo)

7 140190 Vegetable materials, used primarily for plaiting

Source: General Customs Office, Viet Nam

It can be estimated to have a share of about USD 30 - 35 million/year of the total export turnover of

US$ 108.2 million (in 2007) of the product groups that belong to the HS codes in Table 4 and Table 5.

The key markets for sea grass handicrafts are mainly developed countries like Japan, the US and EU

countries like Germany, France, the UK, the Netherlands, Belgium etc.


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Table 5: Export turnover and volume of sea grass handicrafts from Viet Nam

Export value (in 1,000 US$)

HS code 2002 2003 2004 2005 2006 2007

650400 338 5,037 6,593 9,194 8,742 8,738

940150 14,723 21,050 19,503 19,584 19,848 25,572

940380 5,475 6,444 7,316 18,129 38,625 47,693

460120 18,888 21,146 20,246 15,496 11,208 8,440

460290 5,458 6,581 8,676 10,756 16,747 14,038

460210 3,556 4,205 5,196 5,196 5,196 3,761

140190 5,004 3,140 1,298 2,679 4,705 n.a.

Total 53,442 67,603 68,828 81,034 105,071 108,242

Source: trademap.org

II.2 Sea Grass Production in Nga Son District

The Nga Son district is close to the sea in the North of Thanh Hoa province. The Nga Son district has a

total area of 158 km2 with a population of 135,805 persons (2009). 98% of the population in Nga Son

lives in rural areas. The district has 1 town and 26 communes with 8 kilometers of coastal line in 8

communes. The annual GDP growth rate of the district is 9.5%. The agricultural sector plays an

important role in the economy. The contribution of the agricultural production, industry and

construction, services and trade to the total GDP are 51.4%, 19.2% and 29.4% respectively.

Though the poverty rate in the district has decreased steadily from 28% in 2006 to 24.5% in 2007, 20%

in 2008 and 15% in 2009, it is still high in comparison with other regions. The child malnutrition rate in

the district was reduced from 29.2% in 2006 to 26.4% in 2009.

The district has a cultivation area of 17,569 ha with 21,453 rural households in 2009. Cultivation and

cattle raising account for 70.4% and 28.1% of the agricultural gross output. Main agricultural products

of Nga Son are rice and sea grass, which are important factors to ensure food security and economic

structural transformation.

In 2009, the total area for the cultivation of sea grass in Nga Son district amounted to 1,570 ha. The

total amount of sea grass that was processed in the district was 30,400 tons, with 19,100 tons coming

from local production and 11,200 tons imported from other provinces. The total output value of sea

grass products was VND 165.46 billion in 2009.

Sea grass is mainly cultivated in 6 communes (Nga Thanh, Nga Thuy, Nga Tan, Nga Tien, Nga Lien, Nga

Thai), which occupy about 77% of the total sea grass cultivation area. In 2009, these six communes

provided 15,662 tons of sea grass, accounting for 82% of the total output production in the district. The

yield per ha in the six communes is similar to the national average of 8.7 tons/ha in 2008 (for instance


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it was in Nga Thanh in 2009 9.0 tons/ha, in Nga Lien 8.5 tons/ha, in Nga Thuy 8.3 tons/ha and in Nga

Thai 7.8 tons/ha).

The study targets the two communes of Nga Tan and Nga Thai. Nga Tan commune has 1,648

households, of which 501 households are poor. Nga Thai commune has 1,240 households with 239

poor households.1 In Nga Tan commune, 282 poor households are involved in growing and pre-

processing of sea grass, while 149 poor households produce handicrafts from sea grass. In Nga Thai

commune, these numbers are 159 and 80 respectively.

Figure 1: Map of Nga Son district

Source: Wikipedia, 2010

Sea grass growing and sea grass mat weaving had started already over 150 years ago. Up to now, sea

grass mat weaving is often still done by hand. People use sea grass thread, jute thread and “Go” – a

traditional device for the weaving of sea grass mats. Products made in Nga Son district include twisted

sea grass cord, sea grass mats, sea grass carpets and handicrafts from sea grass such as baskets,

slippers or plates. 35% of all households specialize in producing and trading sea grass mats and other

products made from sea grass. Annually, over two million mats are sold.

1 Poor households are those who have an average per capita income of less than 200,000 VND/month (according to Viet

Nam’s poverty line applied to the period 2006-2010). Data on number of poor households are provided by Chair people of the

two communes.


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Finding an appropriate development strategy for the sea grass sector would provide great

opportunities for employment creation in rural areas, which would directly increase income and living

conditions for the rural poor. So, it is very important to answer questions like “Who are the

stakeholders, especially the poor, engaging in sea grass production at all stages?” and “What are the

difficulties/constraints that the poor stakeholders face?” Answering such questions can help to work

out interventions that are necessary to develop the sea grass production and sea grass processing

sector, in order to contribute to improving living standards of the poor in the region.


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III. VALUE CHAIN ANALYSIS III.1 Description and Quantification of VC Actors

The sea grass value chain map (Figure 2) has been developed on the basis of interviews that were

undertaken with a number of stakeholders.

The entire process of making sea grass products starts with sea grass cultivation; sea grass is then

harvested, split and dried. After being classified, high quality sea grass is used to make mats, lower

quality sea grass is twisted and used to make various handicraft items.

Input suppliers

As sea grass has reproductive roots, seedlings are not needed annually, but in a cycle of about 5-7

years, when the sea grass becomes being degenerated. When the new cycle starts, growers have to

replant by plough the land to turn the root upside down. Roots from other sea grass, which are not yet

degenerated, will be used as seedlings for the new cycle. Thus, there are no specialized sea grass

seedling providers in the region. In other words, the sea grass growers are seedling providers for

themselves. However, in the long run, sea grass will be facing the threat of degeneration throughout

the region, which cannot be solved by the farmers themselves. Up to now, input suppliers are mostly

people supplying fertilizer and pesticides, both for sea grass and for other crops.

Sea grass growers

Sea grass growers are farm households. The sea grass growers in the two communes are specialized in

sea grass cultivation on marginal land and most of them have no land that is suitable for rice cultivation

or other crops. Being dependent on a mono-crop, they constantly run the risk of income and food

insecurity, because in case prices are unstable, their incomes are jeopardized and they have no

alternatives for the cultivation of other crops.

After harvesting, the sea grass is pre-processed immediately on the field by

splitting it into smaller size strands. These split strands are then dried for

storing. The sea grass can be sold by farmers in different forms, such as raw

material (sea grass strand), semi-processed sea grass (sea grass cord) and as

handicrafts (rug, carpet, basket, etc). How exactly the farmers process the

sea grass, mainly depends on the farmers’ major field of occupation in the

sector.

The sea grass strand is split from the fresh fiber. When dried, it becomes

slim and soft, retaining the fresh greenish grass color. But when it ages, it

mellows to a light brown color. This fiber is the best material for making

sleeping mats, bags and other household goods. The better quality sea

grass will be sold as strand, while the lower quality will be processed to sea

grass cord.


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Figure 2: Sea grass value chain in Thanh Hoa province

Source: Study team, 2010

Note: Dark grey: Actors within target communes

The sea grass cord consists of multiple fibers being twisted together to form the cord. It looks like

coarse string or fine rope. As it is long and tough, it is used mostly in weaving carpets, rugs, baskets,

storage ware and especially in the packing industry. Sea grass cord can be produced in different

thickness for different requirements (e.g. 2.8-3.0 mm, 3.1-3.3 mm, 3.6-3.8 mm, 4.2-4.5 mm or 5.0-6.0

mm diameter). Sea grass strands and cords can be dyed in different colors for weaving purposes.

Growers sell the strand to mat producers or use it as raw material for household mat production. The

cord will be sold to collectors or to larger handicraft producers or traders, who will export the cord,

mainly depending on their household supplier network and offers received from buyers.


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Sea grass collectors/processors

The main function of collectors is to act as intermediaries between raw material suppliers and material

users. Sea grass collectors are the people who collect dried, split sea grass from the planters to supply

for the sea grass material traders, sea grass material processors or even handicraft producers. Some

large scale collectors may have storage places and they often use sulfur to prevent molding for a

certain period of time.

However, in fact, they also often act as processors (to twist sea grass to become double twisted yarn).

Cords can be sold domestically to sea grass producers or exported. Most of the processed material is

currently exported to China.

The sea grass processors turn split strand into other semi-finished forms, like double or multiple

twisted yarns to make different designs of sea grass handicrafts. As mentioned above, farmers also do

some processing.

Large scale processors, after having bought cords from farmers, have

to dry the cords before keeping them in storage. The cords then can

be sold to domestic handicraft producers or will be exported.

Trading companies or large scale sea grass processors are used to

outsourcing the pre-processing activity to growers. Some companies

(e.g. Nga Son sea grass company, Huy Hoang Co. Ltd, etc.) provide

twisting machines to farm households for them to produce cords on

behalf of the company.

Sea grass handicraft/mat producers

Handicraft producers are people who make sea grass products from raw materials. There are two types

of producers: households and handicraft producing enterprises/companies.

Household producers often produce mats. At household level, most of the processing stages are done

by hand, with farmers using simple looms and twisting tools. Most of the craft persons involved in sea

grass weaving are women. Enterprises buy raw materials either directly from farmers/ processors or

through collectors/traders for their production. In the enterprises, mats are made by machines.

Farmers have the options to either work as employees or as sub-contractors for enterprises. If they are

sub-contractors, they are provided with raw material by an enterprise/company which they use to

produce handicrafts on behalf of the enterprise.

Sea grass mats are mostly sold domestically, while other sea grass handicrafts are made on order for

export. Products made by household producers (mostly mats) are often sold to retailers or wholesalers

in the commune or district and then to final consumers.


P a g e | 19

Mats that are made by large scale enterprises (e.g. Son Phu Company) are often sold in bulk to large

organizations like the army, prisons, hospitals, schools. Handicrafts are almost exclusively exported. In

2006, Viet Trang Company was the first company in Nga Son, which

was contracted to export sea grass products to Japan directly (see

box 1).

However, currently no companies in Nga Son export sea grass

handicrafts directly, except Hoang Long Company. Producers

usually sell through other Vietnamese enterprises working as

intermediaries between the handicraft producers and international

buyers (e.g. in 2008, Viet Trang Company had a contract to produce

cushions and carpets for Vinh Long Company, who then sold the

products to IKEA). Most handicrafts go to Europe, the USA, South

Korea, China and Japan.

Handicraft traders/exporters

The exporters/traders are companies and cooperatives which

operate under the trade and co-operative law of Viet Nam. They are mainly performing functions such

as (1) marketing (2) arranging and financing of the production (3) finishing and inspection of products

and (4) arranging shipment. In the past, the major customers of the local handicraft producers were

state-owned handicraft companies, but now their capacity has improved considerably and they often

supply traders in other provinces like Hanoi and Ho Chi Minh City. Many handicraft producers are still

suppliers of state-owned companies, but these relationships tend to be less and less important and

private handicraft trading companies increase their market share.

International handicraft traders

With the Vietnamese government’s policies

to encourage foreign companies to do

business in Viet Nam, there are a number of

foreign companies and representative offices

sourcing handicraft articles. They come from

many parts of the world and deal with a wide

range of handicrafts, e.g. Nitori (Japan), IKEA

(Sweden), Gibson (USA) etc. Usually, the

foreign companies source sea grass

handicrafts through private traders and state-

owned craft exporters.

These foreign companies play an important

role in providing Vietnamese producers and

traders with internationally-recognized

designs, which is much improving their

Box 1: Case of Viet Trang Company

Viet Trang Export Sedge Products Enterprise in Nga

Son district, Thanh Hoa province has signed many

contracts worth totaling US$ 500,000 to export their

sedge (a type of reed) products to Japan.

The products include sedge cushions, carpets and

sandals. The enterprise is currently producing high-

quality sedge mats, cushions, carpets and sandals for

the European and US markets. The enterprise has

invested in a modern assembly line to dry sedge and

cold storage to increase the quality of their products.

Around 1,000 local farmers in Nga Son district are

taking part in producing sedge products.

Source: Vinanet online newspaper dated 9/03/2006


P a g e | 20

capacity in approaching and understanding international markets.

Most of the foreign companies are really traders, they just buy and sell the products to get some profit,

but some others want to co-invest with Vietnamese traders and state-owned exporters for production.

III.2 Economic Analysis of the Value Chain

An economic analysis of the two typical types of final products made in Nga Son district, i.e. mats and

handicrafts, will be described in this section. While mats are mostly for domestic consumption,

handicrafts are mainly for export purpose. The distribution of benefit along the value chain is also

examined.

The price of products varies not only by the quantity of material used but also by different costs of

craftsmanship, and especially the quality of raw material (for example, the prevailing prices for dried

sea grass vary from VND 5,500/kg to VND 10,000/kg due to different quality, length, color, etc. of the

sea grass).

Usually five types of actors are involved in the process of sea grass mat production: (1) growers who

plant, harvest, split and dry sea grass, so they take the two steps in our general value chain map, (2)

sea grass collectors who collect dried split sea grass, (3) household producers or enterprises who

weave the mat and (4) wholesalers, (5) retailers engaging in domestic market. The actual share of each

actor is shown in Figure 3.

The most popular type of mat in Nga Son is sold at a price of VND 120,000 -180,000/piece. However,

mat prices are ranging from VND 55,000/piece (mats are thin and made from normal quality material)

to VND 250,000/piece or even higher (which is thick, shiny and smooth looking as it is made from high

quality material). In order to ensure comparison of the various mat types, the economic analysis of mat

production in Nga Son will estimate both the lowest and the highest mat prices, as shown in Figure 3

and Figure 4. The low quality mats are made from cheap material (about VND 5,500/kg) and require

only 3 kg of dried sea grass. The high quality mats are made from high quality and expensive material

(about VND 10,000/kg) and require 6 kg of dried sea grass per piece.

According to the estimate made in Figure 3, the added value generated by each actor involved at the

respective stage of the value chain is explained as following:

One low quality mat is sold at retail level for VND 55,000/piece. Total value addition at this

level is VND 5,787 (after deduction of the value of intermediate goods and other

inputs/operational services);

The wholesaler supplies a low quality mat for VND 47,000 and get a high value addition of

more than VND 10,000;

The household producer gets VND 34,700/low quality mat. His costs for buying the raw

material per mat are VND 25,500. In addition he has to pay for other inputs VND 4,200. Total

value addition at this level is VND 5,000 per low quality mat;


P a g e | 21

The sea grass collector sells 3 kg of low quality sea grass at an average of VND 25,500, which he

had bought from the grower for VND 21,000;

Total value addition at grower level is VND 11,200, which is 53% of total revenue of 3kg of low

quality sea grass.

Figure 3: Value addition of producing a mat of a price of VND 55,000/piece (3 kg dried sea grass per mat)

Source: Own compilation by the authors

Figure 4 shows that high quality mats can be sold for VND 250,000/mat. Retailers can get a value

addition of VND 17,500/mat (3 times higher than they get in selling low quality mats) after they have

purchased mats from wholesalers at VND 220,000/mat. Wholesalers benefit from a value added of

VND 9,000/mat, which is the same as what they get by selling low quality mats. Household producers

benefit from high value addition of VND 125,000, which is a share of more than 65% of the total value

addition in the chain.

The sea grass collector sells 6 kg of high quality sea grass at an average of VND 69,000, which he has

bought from the grower for VND 60,000. Total value addition at grower level is VND 40,500, which is 4

times higher than what they gain from low quality sea grass raw material.


P a g e | 22

Figure 4: Value addition of production of a mat of a price of VND 250,000/piece (6 kg of dried sea grass per mat)


Producing high quality sea grass can benefit farmers twice as much as low quality products would.

However, due to many reasons (see details in the constraint analysis), the share of high quality

products will be decreasing gradually within the next few years. Sea grass growers will be the ones to

suffer most if prices decrease. As highlighted in the above calculation, farmers have mainly benefited

from the high prices that prevailed in 2010, which is 3 times higher than the prices in the years 2004 –

2005.

The value chain for sea grass hand bags involves five actors: (1) sea grass growers, (2) material

processors who twist the sea grass; (3) collectors who collect dried twisted sea grass, (4) household

handbag producers, and (5) handbag exporters (Figure 5).

Hand bags are made from yarn, which was twisted from lower quality and cheaper price sea grass. This

is one of the reasons why the share of sea grass growers in this value chain is much smaller than that in

the mat production, both in terms of share (only 2.1%) and absolute value of benefit (VND 821/bag or

VND 2,460/kg). Most of the value added goes to the hand bag producers (VND 15,000 or 38.4%) and

exporters (VND 22,300 or 57.2%). Sea grass collectors and sea grass processors have a relatively minor

share in the value chain, with a value of VND 360 and VND 558 per bag respectively.


P a g e | 23

However, it should be noted that hand bag producers are also sea grass grower households, who have

subcontracting arrangements with enterprises/companies. In this case, farmers can earn more benefits

from sea grass handicraft manufacturing as a non-farm income source.

Figure 5: Value addition of producing a sea grass handbag for export to France (0.3 kg of dried sea grass per bag)


III.3 Constraints Analysis

Input supply constraints

Sea grass is a type of plant, which can re-grow after harvest, but needs to be replanted every 5 years.

Sea grass in Nga Son is one of the best qualities in Viet Nam. However, to obtain a good quality sea

grass strand, the sea grass plantation needs certain conditions and treatment such as water level,

water with proper sea water content, pest control and fertilizer application etc.

Recently, problems incurred through the intrusion of saltwater during the dry season have threatened

the development of sea grass plantation. After a long time of re-planting from the same root, the


P a g e | 24

alluvium caused the sea grass fields being heightened gradually, which lowered the natural water level

in the fields and, therefore, negatively affected the productivity of sea grass production. If, in these

cases, the irrigation system works well, it can compensate for the lacking water resources. But if

irrigation functions poorly, watering of sea grass becomes more difficult and costly.

Technically feasible options to overcome these constraints are an improvement of irrigation systems or

lowering of the land level. However, these two options require huge investments, which are estimated

to be at least VND 100 million/ha for the initial change of land level. Further on, the irrigation system

requires reinvestment for maintenance every 1-2 years because the channel edge may collapse. Unless

the irrigation and land problems are solved, it is difficult to improve the productivity of sea grass

cultivation in many areas of Nga Son district.

Degeneration caused by continuous re-planting using own planting material is another issue, which

affects productivity and sea grass quality.

Production constraints

According to indications received from some major buyers of sea grass material, sea grass can be

classified by length. It is often divided into 7 sizes (grade 1: 1.75 m; grade 2: 1.65 m; grade 3:1.55 m;

grade 4: 1.45 m; grade 5: 1.35 m; grade 6: 1.15 – 1 m and grade 7: 1- 0.60 m) and the quality of sea

grass stem is graded by three levels A, B and C regarding the diameter of stem, color, even split,

number of moles, etc. For any grades, the prerequisite conditions of sea grass specifications are: Well-

dried, fresh, at least 80% of the sea grass strand in a bunch has the same length.

In order to reach a larger amount of the highly-graded sea grass, all activities along the chain from

growing, harvesting, via processing, to drying etc. need to be conducted in an appropriate way that

often requires labor intensive methods. After cutting, the sea grass needs to be processed as soon as

possible. Otherwise, it will turn to brown color, which cannot be used for handicraft production. For

example, the quality is better, if sea grass is harvested in the afternoon and then split the next

morning. Or the technique of natural drying contributes to retaining the fresh color and plasticity of

sea grass, which may require a 4-5 days intensive and careful treatment by farmers.

However, after a period of dealing with low quality sea grass demand from the Chinese market (highest

demand for multiple twisted yarns/cords), the incentives for farmers to produce high quality sea grass

are gradually lowering and the growers, collectors/traders feel reluctant to work with high quality sea

grass now.

In other provinces (e.g. Ninh Binh), when the price of sea grass went down 2-3 years ago, sea grass

growers tended to replace sea grass fields by aquaculture (e.g. raising shrimp/prone and crab). This

trend of change helped to increase farm income for some time, but they were soon faced again with

market difficulties such as price fluctuations, diseases and sanitary and phytosanitary issues. No in-

depth study has for far been conducted to analyze the differences in competitiveness between sea

grass production and aquaculture, so it is difficult for farmers to take decisions on the selection of

farming activities.


P a g e | 25

Processing is done with very simple tools instead of using splitting machines.

Black root disease currently is another problem that sea grass growers are facing. Insects, which cause

black spots on the stem cannot destroy the plant, but have severe effects on the quality of strands.

The lack of agricultural extension service officers

specialized in sea grass plantation is another problem in

the area, which directly affects productivity and quality

of sea grass production. Many growers learn farming

practices and pre-processing techniques through passing

on skills from one farmer to another and by training-on-

the-job.

Handicraft producers are facing constraints in storage of

harvested materials that are to be used for handicraft

production. A long supply chain with many small scale

growers and collectors without proper preservation

activities results in a low quality and perishable products.

This constraint is causing huge losses, as the price gap

between materials of good and poor quality can roughly be estimated at 4,000 - 6,000 VND/kg.

Household producers do not seem to have any constraints in mat production, as they normally use

their own material. However, enterprises/companies face difficulties to source adequate raw materials

for regular production. Only during the sea grass harvesting season (6 months/year), material supply is

sufficient for the large companies. The key constraint of those companies is the lack of capital to keep

stock of raw material during off season. Also, they lack investment in upgrading their machinery for

large scale production of mats. Handicraft enterprises/companies also face the lack of skillful workers

and designers. This is dictated through the fact that they have few designs and rely on buyers’ samples.

Nga Son is famous for its raw material, and the highest quality mats in Viet Nam are from Kim Son,

Ninh Binh. Nga Son’s high quality sea grass strands are exported to Kim Son to produce high quality

and high value mats.

Market access constraints

China is by far the predominating market for sea grass from Nga Son and the producers in Nga Son

depend highly on demand fluctuations from the side of the Chinese buyers. These demand

fluctuations, in turn, depend highly on general world market trends and were recently heavily affected

by the general slowdown of international demand due to the world financial crisis.

Though Nga Son is a famous location of sea grass, till now, a geographical indication (GI) of Nga Son has

not yet been established. It is also difficult to build up a “brand name” for Nga Son sea grass and for

handicraft products due to the inconsistence of product quality produced by both farmers and

handicraft producers.

Box 2: Interview in Nga Son sea grass

Association

The quality of sea grass in Kim Son, Ninh

Binh is often lower than that in Nga Son.

Whereas a big quantity of Ninh Binh sea

grass is transported to Nga Son to be sold

to Chinese customers, at the same time,

high quality sea grass from Nga Son is

supplied to handicraft producers in Kim

Son for further processing to make high

quality products for export.


P a g e | 26

The main output of Nga Son is raw material, which has low value added and bears a high risk at all

stages of the supply chain. Handicraft production using sea grass material is underdeveloped in Nga

Son, which causes a big loss of Nga Son in utilizing their natural resources.

The most difficult issue of sea grass handicraft production in Nga Son is access to foreign markets with

high value addition. Very few enterprises in Nga Son now have the capacity to export directly to foreign

countries. Most of them have to export through foreign representatives located in Viet Nam. Lack of

qualified staff with professional knowledge on international business has been mentioned by most of

the companies as a reason for this constraint. International product requirements are also not yet well

known by the companies and most of the enterprises are not able to meet international standards to

sell directly to international buyers.

Most of the traders in Nga Son are deficient in marketing skills, not having appropriate strategies for

product development, pricing, market access and promotion.

The producers and traders in Nga Son also lack information on how to access markets, and they do not

have access to business-related information. Even if there are some sources of information available

(VIETRADE - Viet Nam, CBI - The Netherlands, JETRO - Japan, EBIC –EU etc.), the local traders of sea

grass in Ninh Binh often find it difficult to use them. They do not understand trade practices and legal

requirements nor do they know about design trends on foreign markets. This lack of information and

knowledge increases their reluctance to approach foreign markets directly. This is compounded by the

fact that they also lack capital to invest in marketing.

There are some kinds of natural materials that can be used to replace sea grass or, at least, to produce

similar products. Many of them are available in Viet Nam, such as bamboo, rattan, fern, palm, jute,

water-hyacinth, abaca (banana fiber), pandan or rice straw and forest creeper. Some of them can

compete with sea grass because of their lower prices and more consistent quality and productivity. If

the sea grass sector cannot be upgraded to more efficient production and quality consistency, it may

lose its competitiveness.

Technology and product development constraints

The technology used by the farmers to preserve raw material and finished products poses additional

constraints on the sea grass sector of Nga Son district. Being constantly exposed to high humidity, sea

grass and the products made from sea grass can easily mold. Therefore, raw material and products

need to be kept under cool conditions. Presently, only one enterprise in the district has a small cooling

warehouse that was established within a pilot project conducted by the Department of Commerce and

Industry in the district.

Another constraint lies in the fact that producing firms in Nga Son do not have access to professional

designers and in addition have difficulties to obtain the required qualities within their outsourcing

systems. Since a large part of handicraft products in Nga Son are produced at farm household level, it is

very difficult and expensive for the producing companies to change to new designs. It is recorded that


P a g e | 27

some buyers have requested their supplier firms to make products with new designs, but that the local

companies are not able to provide them, since they do not have the time to train all their producers at

farm level and, in addition, face the risk to get a high proportion of bad quality products.

In order for producers to diversify their product range, they need to train the producers within their

outsourcing structures on design of handicraft products. As mentioned by Viet Trang company, a

customer from Russia requested the company to show new designs for a new contract, but the

company was not able to provide new designs. Moreover, according to leading enterprises in the

region, they also need new machinery (sewing machines) for better finishing of final products. Carpets

are potential products, but handicraft companies are still reluctant to invest both in term of machinery

and technical workers to develop this product.

Handicraft producers also lack basic knowledge on material requirements and information on the use

of the products, which would help them to control the production system better. This does not only

concern producers, but also the collectors and even traders.

Organization and management constraints

Many managers of enterprises in Nga Son district lack management skills, despite their experience in

the sea grass trade. As a matter of fact, almost none of the small and medium scale handicraft

producers have a clear development strategy in place. They simply produce according to orders and

samples received from buyers.

Services constraints

For sea grass plantation, extension services play an important role. But each commune has only one

extension service officer who, in addition usually lacks updated information and expertise. All

communes in the district need more and more qualified extension officers.

Existing sea grass associations have not been active enough and thus unable to provide timely and

efficient assistance to their members.

Financial constraints

Lack of capital is a problem mentioned by every stakeholder in the value chain. Farmers are usually

short of funds when it comes to improving their land plots for plantation. Companies are always short

of capital, especially if they have to handle large orders. They also need capital to finance material for

storage and off-season production and to invest in new machinery. The traders often mobilize capital

from many sources such as advance payments from buyers, loans from banks or borrowing from

informal sources. Banks are important sources of finance, but the banks usually take their time in

granting loans (7 to 10 days) and on top of that require collateral. Therefore, in many cases, companies

have to get the loan from informal sources at higher interest rates, which then will increase the cost of

their production


P a g e | 28

Figure 6: Constraints at micro level

III.4 Socio-economic Parameters (Gender, Work and Labour Standards)

Women account for about 95% of the total labor force in the sea grass industry and are involved in

most of the activities along the value chain (e.g. in plantation, harvesting, processing and collecting raw

materials, weaving and selling final products). Men only participate in activities that need great

physical strength, such as harvesting, dyeing and transportation. Besides working as sea grass weavers,

the crafts women can be good trainers for young workers in the industry.

Women can produce handicrafts at home or on the premises of the manufacturing companies. They

have only mufflers to protect them from the dust created in producing and weaving. Most of them

have neither health nor social insurance.

The reasons why poor people in Nga Son district remain poor are manifold: First, their main crop is sea

grass, which is vulnerable to weather changes. Second, they are not trained sufficiently to produce

handicraft products. They are just able to do simple jobs (e.g. harvesting, splitting or twisting), which

they prefer because of quick earnings. Third, they hesitate to participate in handicraft training courses,

as they are afraid of the opportunity costs for not being able to generate income while participating in

the courses.


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III.5 Environmental Concerns

Though sea grass enterprises in Nga Son district are using more and more dyeing substances in making

their handicraft products, they are not aware of the necessity to have environmentally friendly dyeing

techniques, especially regarding the treatment of waste water after the dyeing process. Moreover, the

use of fertilizer and pest control are other threats especially for intensive farming systems.

III.6 Meso Level Support Institutions and other Projects

There was no project in the sea grass VC in Thanh Hoa province before this project was formed. There

exists a Sea Grass Association in Thanh Hoa province and almost every sea grass enterprise is a

member. However, they all claim that the association has not been able to provide them with efficient

services.

Leaders of Nga Tan and Nga Thai communes also mentioned that the Plant Protection Research

Institute had studied sea grass pesticides (brown plant hopper (Nilaparvata lugens) and other pest)

during the last 3 years. However, still no solution has so far been found for the pest problem in the

communes.

Sea grass growers in Nga Thai commune can convert their land to use other crops such as rice if

necessary. In 2007-2008, when sea grass prices went down, Nga Thai leaders encouraged sea grass

growers to replace sea grass by rice to ensure food security in the area. Support with fertilizers had

been provided to farmers for this replacement. However, sea grass growers in Nga Tan commune

cannot convert their land to use other crops, since the land is in a saline water area. In the year of 2007

– 2008, when prices for sea grass went down, leaders of the Commune People Committee also

supported sea grass growers in order for them to have enough food.


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Figure 7: Critical Points at Meso level Support Institutions


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IV. VALUE CHAIN UPGRADING STRATEGY IV.1 Market Opportunities and Competitive Advantage

Sea grass of Nga Son is estimated to be one of the best sea grass raw material in Viet Nam (see Table

6). However, sea grass of Nga Son is sold mostly as raw material (strands and twisted yarns, cords) and

the potential to produce higher value handicrafts for both the local and international market is hardly

exploited.

Mats are the main final sea grass product being fabricated in Nga Son. But, currently, the production is

nearly exclusively done for the national market. And it concerns particularly the lower market

segments, offering a very basic quality and cheap prices. Companies also used to export the simple

qualities to the former Soviet States, but complain that demand on these markets has collapsed. The

largest client left on the national market is the Vietnamese army.

The southern provinces are the most competitive sea grass articles producers, due to their large

cultivation areas and a well-developed handicraft sector structure. The sea grass itself is in general

cheaper in Southern Viet Nam and sea grass is only sourced from Northern Viet Nam at times of high

peak seasonal demand. A discussion with one of the largest producers of sea grass articles in Southern

Viet Nam evidenced that the natural resources and the enterprise structure to be found in Southern

Viet Nam are sufficient, and that there is little interest from stakeholders in intensifying the

cooperation on sea grass products with Northern provinces.

Table 6: Quality of sea grass in different locations

Place Kim Son

(Ninh Binh)

Nga Son

(Thanh Hoa)

Quang Xuong

(Thanh Hoa)

Sa Dec

(Dong Thap)

Root’s colour Black White White White

Stem’s diameter Even Even Uneven Even

Plasticity Good Good Good Not good

Source: Ngoc, 2005

Over the last years, many developed countries have demonstrated their interest in eco-friendly and

energy saving production. Many consumers have changed their habits towards preferring natural

“green” products.

As a result of the recovering world economy, the demand for sea grass is rising again, which should

offer as well again better market opportunities for sea grass farmers, particularly with regard to re-

increasing sea grass raw material exports to China.

In order to develop more stable market relations, there is a potential to promote direct market

linkages between Vietnamese exporters and Chinese handicraft manufactures, avoiding intermediary


P a g e | 32

traders in China. Sea grass companies in Nga Son may as well be able to supply Chinese companies

with semi-finished sea grass articles.

If value addition and economic development are to be increased further on, it will be necessary to

address additional market segments, taking into consideration changing customer demand for more

sophisticated products. Main market opportunities for final sea grass articles can be characterized as

follows:

Nga Son has a national reputation, a “name” for sea grass mats, on which it can build to supply

higher value products to the national market;

Higher value, design-oriented mats can be exported as well to international markets in Europe,

Asia and America. For instance, well-designed Cambodian sedge mats of a size of 1.25 m x 2 m

sell for an fob price of about 15 $;

Additional products, such as foldable mats, can serve as picnic or beach mats. Some companies

in Nga Son are already experimenting with these;

Solid sea grass rugs (woven sea grass cord instead of simple sea grass strands as done for mats)

in different grey shades (without using dyes) are sold by IKEA and other companies. Some

examples of such sea grass carpets, and how they fit into European “green” lifestyle interior

decoration trends, can be found at www.brigitte.de/wohnen/wohnen/einrichten-leder-holz-

555774/. Similar 6 ft - 9 ft rugs can also be found on the American market, where they sell at a

retail price of about 100 $ per rug.

Although sea grass mats and carpets are still sold on niche markets in Europe, being a “light”,

fashionable kind of carpet, they meet with growing interest of importers, provided quality

requirements are met. Sea grass mats fit particularly well with Asian and Southern European

“Mediterranean” interior decoration styles. Market opportunities are provided through changing taste

and growing demand of both Asian middle-income families and “green” European/American

customers.

At present, sea grass carpets from Nga Son are far from being competitive on these markets. In order

for the Vietnamese producers to seize these opportunities, the sea grass mat production needs to be

upgraded in Nga Son in terms of design (patterns, colors, collections), quality (firmness, durability,

finishing), production (AZO-free dyes) and export logistics (packaging, export documentation, customer

communication). If this is achieved, and if producer groups organize themselves well, competitive

products can be produced at enterprise level as well as at household level.

There is also a particular potential for the development of markets for door mats made from twisted

rope. The producers in Nga Son are very skillful in weaving door mats. Russia and neighboring countries

were a large market for such products in the past.

IV.2 SWOT Analysis

The following table summarizes strengths, weaknesses, threats and opportunities (SWOT) that were

identified for the sea grass value chain in Nga Son, Thanh Hoa.

http://www.brigitte.de/wohnen/wohnen/einrichten-leder-holz-555774/

http://www.brigitte.de/wohnen/wohnen/einrichten-leder-holz-555774/


P a g e | 33

Table 7: SWOT analysis

Strengths Weaknesses

Good species of sea grass, high quality

compared to sea grass of other regions all over

the country

Well-known quality of Nga Son sea grass not

only in Viet Nam but also abroad

Long tradition of cultivating sea grass and

making sea grass products, especially mats.

Sea grass has received attention from local

authorities as it is one of the two main sources

of income and job creation for people in the

region. Household labor can work as growers

and mat producers.

Sufficient labor force with reasonable labor

cost

Sea grass is degenerating due to long time of re-

cultivation from the root

Degrading irrigation system

Sea grass cultivation area is reduced as a result of

year-by-year increasing alluvium and salt water

intrusion

Difficulties in pest control

Farmers lack capital to invest in intensive farming

systems

Handicraft producers lack professional handicraft

designers

Handicraft producers are not very skillful at

handicraft making

Sea grass traders mainly trade raw material with low

value and high market risk

Lack of business management skills

Opportunities Threats

International market demand is increasing

again

Potential for direct market linkages with

Chinese handicraft producers

Demand for higher value, well-designed

fashionable sea grass mats and carpets

Potential market demand for novel products

(e.g. foldable mats, pic-nic mats)

Improvement in government policies has

created better business environment for

enterprises to trade sea grass products

domestically and internationally

Stronger competition from companies in other

provinces (e.g. Ninh Binh), especially from southern

provinces in accessing international markets

High dependence on the Chinese market

Price fluctuations reduce incentives for growers to

cultivate sea grass

Climate changes with severe drought will jeopardize

maintaining of existing cultivation area

IV.3 VISION

An appropriate vision for upgrading the value chain for sea grass value chain in Nga Son Thanh Hoa can

be proposed as follows:

“The productivity and quality of sea grass production is improved and sea grass

processing companies have diversified their product range and markets, which then

creates more non-farm jobs for rural labor force in the area.”


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Figure 8 shows the main constraints with regard to achieving the vision and how these can be

addressed by different solutions.

Figure 8: Vision for the sea grass value chain in Nga Son

Higher benefits can be obtained by the growers if the productivity of sea grass cultivation can be

enhanced. Local authorities in Nga Thai and Nga Tan expect that it is possible to increase productivity

by 50%, if farmers apply proper cultivation practices. Higher productivity and better quality will be

factors that make Nga Son sea grass more competitive in the domestic raw material market. It also

ensures that sea grass production can continue to exist even under the pressure of other competitive

sectors like aquaculture/shrimp production.

In the next 1-2 years, the export of raw material will retain its importance for the sea grass value chain

in Nga Son. If pre-processing techniques (splitting and drying sea grass after harvest) are improved, so

will be the quality of sea grass strands and yarn, which creates more income for the growers and

processors. By bringing about this improvement, producers of sea grass articles will upgrade their

production to meet high-end market demand.

In addition, the promotion of a “brand name” of Nga Son sea grass can stimulate domestic

consumption of more fashionable sea grass mats. On the export market, results can be achieved if

producers in the sector manage to improve on their quality (more firmness, durability, AZO-free dyes

etc.), to have better export logistics (packaging, export documentation, customer communication) and


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to offer more attractive designs. This would help Nga Son sea grass products approach high-end value

markets such as Eastern Europe, US America, Japan etc.

By having improved business management capacities and improved access to market information,

producers of sea grass articles in Nga Son will be able to diversify their export markets. Given the

economic development in the past few years, Asian and South East Asian economies will be potential

markets for Vietnamese sea grass products. Both the changing taste and growing demand of Asian

middle-income families and “green” European/American customers provide sea grass producers with

market opportunities.

IV.4 SUGGESTED FACILITATION ACTIVITIES

The following upgrading solutions and facilitation activities are recommended.

Table 8: Upgrading Solutions

Upgrading solution 1:

Improve productivity and quality of sea grass

cultivation

Related facilitation activities:

Develop a training manual for intensive sea grass

cultivation (soil preparation, plantation, caring, pest

and disease control, etc.;

Train local trainers and conduct pilot trainings with

farmers;

Support for the development of demonstration

areas (5 ha), if possible in form of a PPP with a local

company;

Conduct a study on the environmental impact of sea

grass plantation in Nag Son;

Support improvement of planting material and sea

grass varieties.


Improve the quality of sea grass raw material after

harvesting


Train farmers to adopt pre-processing techniques

applied to sea grass right after harvesting;

Support to develop storage systems, which create

benefits for both the service provider and other

stakeholders along the chain;

Support the formation of a production group to

focus on high quality mats and door mats for both

the local and international market;

Introduce new techniques of sustainable and

durable dyeing;

Introduce techniques which allow to keep the

natural green color of sea grass;

Study eco-friendly preservation techniques of sea

grass products to be free from mold for a certain


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period of time (6 months) and promote such

techniques in the value chain. The Institute for

Agriculture Machinery and Post Harvest Technology

is one of the possible research institutes that can

conduct such study.


Diversify sea grass handicraft products to meet

potential high-end market demands


Establish direct business relationships with Chinese

handicraft producers, who source sea grass raw

material through intermediary traders in China;

Organize a business matchmaking event with

potential Chinese buyers;

Develop the production of semi-finished products

for Chinese handicraft producers;

Conduct an in-depth study about market demand

for sea grass handicrafts and alternative materials,

with particular focus on Russia/Eastern Europe;

Organize a study tour for company management

staff to enhance their market understanding;

Assess the feasibility to invest in the production of

high quality sea grass rugs with latex undersurface.

Support exporters to expand their sales network;

Train workers of to learn techniques to produce

high value products (e.g. carpets);

Training in trade promotion for company leaders or

their potential successors;

Support leaders of companies to participate in SYB

(Start Your Business) and IYB (Improve Your

Business) courses.


Improve capacity in product design


Invite foreign designers to develop new product

ranges for sea grass handicraft manufacturers;

Build capacity of in-house designers employed by

the companies;

Develop internship programmes with the Hanoi

Industrial Art College.


Address environmental, labour, occupational

safety and health issues in order to meet market

requirements.


Investigate and build capacity to address

environmental concerns in the sea grass production

process;

Investigate and build capacity to improve

occupational safety, health and labour conditions

among sea grass workers, taking international buyer

requirements fully into account.


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V. RECOMMENDATIONS

As the present study suggests, the JP is coming at the right time, as market demand is increasing again

and local authorities are willing to support the development of the sea grass cultivation and handicraft

industry. Currently there is no strategic development plan available, which may include prioritized

activities and a clear roadmap for sea grass cultivation and handicraft sector development at district or

provincial level. The development plan worked out in the past was mainly supply-oriented and is

considered as an administrative burden by the local authorities rather than a real strategy or

framework for the sector’s development. It was also found that the previous development plan lacked

the participation of important stakeholders (e.g. the private sector) in the establishment process. As a

consequence, key private stakeholders felt the plan was irrelevant as they were excluded in the

process.

Thus, it would be helpful, if the present value chain study can contribute to stimulating new, concerted

efforts to promote the sea grass value chain with the participation of all stakeholders, especially from

the private sector and researchers.

Up-scaling the production can help growers to increase productivity and income. A diversification of

products and markets is necessary in order to reduce the dependence on the Chinese raw material

market and in order to be able to benefit from opportunities on the domestic and international

market. Trainings in business skills and design development can increase international

competitiveness.

The present value chain study should also help to strengthen again the Nga Son Sea grass Association,

which should play a key role in promoting and coordinating all activities as a main partner for the local

authorities and the JP. The commitment of the major stakeholders such as large scale companies and

large scale collectors must be sought to discuss joint efforts to develop the sea grass value chain. It is

suggested that the JP meets regularly with the association and its advisory board for further

coordination of promotion activities.


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VIII. APPENDICES Appendix 1: List of interviewees in Nga Son district

No Name Function Location

1. Mr. Tuyen Nga Tan commune chairman Nga Tan

2 Ms. Thao Sea grass collector Nga Tan

3 Ms. Tuyet Sea grass grower Nga Tan

4 Mr. Phu Sea grass mat maker -Son Phu Co Nga Thai

5 Mr. Vu Thanh Ly Nga Thai commune chairman Nga Thai

6 Ms. Yen Nga Thai sea grass worker in Son Phu

company Nga Thai

7 Mr. Duong Anh Tuan Sea grass handicraft maker – Hoang

Long Co. Nga Son town

8 Ms. Tran Thi Viet Sea grass mat maker – Viet Trang

enterprise Nga Son town

9 Mr. Tho DOIT Nga Son Nga Son town

11 Mr. Hai DOIT Nga Son Nga Son town


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Appendix 2: Project Area Profile (2009)

The socio-economic situation of Thanh Hoa province

Total area (ha) 1,112,034

Population 3680418

Kinh 3,071,837

Others 608,581

Ethnic minorities rate (%) 17%

Total GDP (million dong) 22,141,000

Agriculture – Forestry – Aquaculture (million dong) 6,715,000

Industry (million dong) 8,090,000

Services (million dong) 7,336,000

GDP per capital (million dong) 6.02

Poverty rate (%) 30.80%

Source: GSO, 2009


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Appendix 3: Programme Coverage Area

VALUE CHAIN STUDY FOR SEA GRASS IN NGA SON …Value Chain Study for Sea Grass in Thanh Hoa Province,...

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