The rental market for farmland in Vietnam's Mountainous North Central Coast Region: outcomes and constraints

Abstract

Vietnam's rural areas are characterized by small and fragmented farms, cost inefficiency, and low agricultural income. An efficient land rental market is expected to alleviate some of these problems by creating incentives for allocative efficiency. Voluntary rental transactions are also expected to improve the welfare of both lessees and lessors. This study investigates the efficiency and equity outcomes of the rental market for farmland in a commune in Vietnam's north central coast region, a mountainous area with relatively low incomes and a high concentration of ethnic minorities. It also examines the efficiency of the rental market itself, recognizing that market participation is affected by cultural norms and mutual trust. Data for the study were gathered in 2 household surveys, each conducted in 2 villages. The first was a multistage sample survey of 200 households; the second was a census survey of rental market participants. It was found that the rental market is encouraging households to trade their land use rights in mutually beneficial ways that transfer land to more effective farmers. But there is considerable room for improvement through increasing the number of market participants by reducing transaction costs associated with inadequate information, opportunism, and lack of confidence in the legal system. Perceived levels of risk differed between Kinh and Thai respondents.