HIAS-E-130

Government and market initiatives forthe governance of fertilizer quality in Vietnam
Emi Kojin(a), Do Van Hoang(b), Nguyen Thiet(b), Yutaka Arimoto(c),Vo Hong Tu(b), Yukichi Mano(c), Nguyen Duy Can(b), Kazunari Tsukada(a)(a)

Institute of Developing Economies, JETRO(b) Can Tho University(c) Hitotsubashi University

May 2023

Hitotsubashi Institute for Advanced Study, Hitotsubashi University
2-1, Naka, Kunitachi, Tokyo 186-8601, Japan
tel:+81 42 580 8668 http://hias.hit-u.ac.jp/
HIAS discussion papers can be downloaded without charge from:https://hdl.handle.net/10086/27202
https://ideas.repec.org/s/hit/hiasdp.html

Government and market initiatives forthe governance of fertilizer quality in Vietnam
Emi Kojin, Do Van Hoang, Nguyen Thiet, Yutaka Arimoto, Vo Hong Tu, Yukichi Mano,
Nguyen Duy Can, Kazunari Tsukada
May 29, 2023

Abstract
The governance of fertilizer quality is critical to food security, as the prevalence of low-quality
fertilizers hinders fertilizer use and stagnates agricultural production. This paper documents andassesses the government and market initiatives to address this issue in Vietnam. We conduct indepth field interviews with stakeholders and identify three initiatives related to fertilizer quality
control in the markets: (1) government regulation and control through licensing, mandatory
quality labeling, and random inspections; (2) producer efforts to maintain quality and brandthrough warranty and dealer certification; and (3) hierarchical social learning, where fertilizer
retailers update product assortments based on reputations among farmers, who regularly evaluate
fertilizer quality. We highlight the importance of public regulation by discussing how government
and market initiatives interact and complement each other.
Keywords: low-quality fertilizer, experience goods, Vietnam
JEL codes: L15, L51, Q16, Q18

1

1. Introduction
Fertilizer application is an essential part of modern agriculture to improve production andyields (Evenson and Gollin, 2003; Foster and Rosenzweig, 2010; Njeru et al., 2016). While thegreen revolution with modern varieties and fertilizers has been successful in South Asia, Africa
has been left behind (Otsuka et al., 2023). While a number of reasons have been discussed, underapplication of fertilizer is one of the main considerations (Carter et al., 2021; Gollin et al., 2021). 1
Studies have identified several barriers to fertilizer application in Africa, including lack ofknowledge and information, credit constraints, costs, uncertain or low expected returns, andbehavioral constraints (see Foster and Rosenzweig (2010), Magruder (2018), Macours (2019),
and Suri and Udry (2022) for reviews). 2 Moreover, recent studies suggest that concerns about
fertilizer quality hinder adoption and use, resulting in stagnant yields and agricultural productivity,and low farmer profitability (Suri et al., 2022).
Low-quality or counterfeit fertilizers are commonly reported in many developing countries, 3
and farmers often assume poor quality because they cannot determine the actual quality fromobservable characteristics or market signals (e.g., price) (Ashour et al., 2019; Ariga et al., 2019;
Bold et al., 2017; Michelson et al., 2021; Ola and Menapace, 2020). Countermeasures andpractical policies are needed to reduce the low-quality fertilizers in the market and to correct
farmers’ perceptions of fertilizer quality. 4
This paper documents and discusses the government and market initiatives 5 that shapefertilizer supply chains and influence fertilizer quality in Vietnam, which is a leading riceproducing and exporting country. We conducted intensive reviews of newspaper reports
Another important factor is that proper rice cultivation practices, which have been widelyadopted and proven effective in Asia, are not sufficiently disseminated in sub-Saharan Africa(Otsuka et al., 2023).
2
Khor et al. (2018) show risk aversion to reduced fertilizer use among low-income farmers in
Vietnam, the context of our study.
3
A recent study raises the possibility that the reported findings of the nutrient deficiencies may
be susceptible to measurement error in nutrient content (Hoel et al., 2021).
4
For non-quality barriers, various policies have been discussed and implemented to promote
fertilizer application, including technical assistance and extension services (Bernard et al., 2017;
Harou et al., 2022; Kondylis et al., 2017; Suri et al., 2022), subsidies (Carter et al., 2021; Jayne
et al., 2018, Harou et al., 2022; Holden, 2019), and nudges to overcome procrastination in fertlizer
purchase (Duflo et al., 2011).
5
We use the term “market” rather than “private” initiatives because many (large) fertilizer
producing companies in Vietnam are state-owned.
12

documenting fertilizer quality problems and relevant regulatory frameworks. We also conducted
in-depth interviews and discussions with stakeholders to learn about government and market
initiatives, their implementation and effectiveness, and respondents’ perceptions of fertilizer
quality.
We identify three government and market initiatives. First, the government has strengthened
direct control through a comprehensive regulatory framework consisting of training, licensing,mandatory quality labeling, and random inspections. Our interviews with retailers confirm thatthe government’s controls have indeed been implemented and complied with. However, we also
found room for improvement in streamlining the complicated regulatory structure, improving
coordination among government agencies, strengthening inspections, and verifying complianceon the government side. Second, large fertilizer producers establish and maintain their brands byproviding a warranty against customer loss due to quality problems and by certifying dealers tomanage and control the distribution chain. Third, farmers and retailers try to avoid low-quality
fertilizers through a hierarchical social-learning mechanism. Farmers assess fertilizer quality
through careful observation, and retailers determine product selection by aggregating farmer
feedback.
Vietnam is an important case to study. Vietnam shares with sub-Saharan Africa (SSA) thecommon experience and perception of low-quality fertilizer flooding (Bold et al., 2017;
Michelson et al., 2021). However, unlike SSA, the government of Vietnam has taken steps tomitigate the problem through policies and regulations. In addition, the fertilizer market has
evolved into a small number of large producers with well-established brands that dominate themarket. 6 In this regard, Vietnam meets several criteria for the late growth stage of fertilizer
markets within the framework of Ariga et al. (2019). While the effectiveness of these initiatives
requires further evaluation, nitrogen inputs increased 20-fold and rice yields tripled between 1980
and 2020. Today, Vietnam is one of the world’s largest rice producers and exporters.
This paper contributes to the policy discussion on the governance of fertilizer quality.
Emerging literature has examined the extent of low-quality inputs in the market, their potential
mechanisms, and farmers’ perceptions and use (Ashour et al., 2019; Ariga et al., 2019; Bold et al.,
These conditions differ from those in SSA, where fertilizer quality governance is not wellestablished, unbranded fertilizers are still common, and farmers often underuse chemicalfertilizers (Ashour et al., 2019; Ariga et al., 2019; Bold et al., 2017; Hoel et al., 2021; Michelson
et al., 2021).
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2017; Michelson et al., 2021; Ola and Menapace, 2020). Less discussed are policies and strategies
to mitigate this problem. We add to this literature by documenting the government and market
initiatives taken in Vietnam to address the problem of low-quality fertilizer, and we highlight how
these initiatives interact and complement each other. Our materials will also be useful for better
understanding the fertilizer quality problem and formulating policies and initiatives to address it
in SSA.
This study also contributes to the understanding of fertilizer quality in Vietnam. Mano et al.
(2023) examine the quality of unbranded fertilizers, the most vulnerable segment of the market,
in the Mekong River Delta and find that the nutrient labels are reliable on average, but suffer fromlarge quality variability. We directly complement this finding by providing detailed institutional
context.
The remainder of this paper is organized as follows. Section 2 presents the conceptual
framework of the fertilizer quality problem and the background of the fertilizer market in Vietnam.
Sections 3 and 4 describe government and market initiatives to address the fertilizer quality
problem. Section 5 summarizes the findings and discusses their implications.

2. Conceptual framework and background2.1. Fertilizers as “noisy” experience goods
If product quality is known to sellers but not fully observed by buyers, low-quality products
may drive high-quality products out of the market, and farmers may reduce fertilizer application.
The case of fertilizer is particularly problematic because it is a noisy experience good, and farmers
cannot accurately assess product quality, but only observe noisy signals from its use (e.g., crop
growth) that are also influenced by other factors (e.g., weather conditions and farming practices)(Bold et al., 2017). 7 Therefore, typical reputation mechanisms, in which consumers stop buying
when they perceive poor quality, are not sufficient to address the market failure alone.
Government control is expected to play an important role through licensing and certification,
mandatory quality labeling, and random inspections (Dranove and Jin, 2010), as will be discussed
in Section 3.

This is a common problem for noisy experience goods such as seeds, pesticides, herbicides(Ashour et al., 2019), or antimalarial drugs (Björkman Nyqvist et al., 2022).

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2.2. Vietnamese agriculture in the doi moi era
Vietnam’s society and economy have undergone drastic changes since the start of doi moi in
1986, which aimed to transition from a centrally planned economy to a socialist-oriented market
economy. Agriculture was no exception. Farmers who had been involved in agricultural
production only as members of cooperatives under the planned economy were allowed to manage
their own farms at their own discretion after the start of doi moi. With the increased incentives forfarmers to increase production, rice production soon exceeded policy targets after the introductionof the doi moi policy (Figure 1(a)).
Today, Vietnam is the fifth-largest rice producer in the world and the third-largest exporter in2018 (FAOSTAT). Our study area, the Mekong River Delta, is the largest rice bowl, followed by
the Red River Delta. The increase in rice production and yields in the early doi moi period was
driven by improved farmer motivation to produce rice and technological improvements, such as
the construction and maintenance of irrigation facilities, the adoption of modern varieties, and a
rapid increase in fertilizer application (Figure 1(b)). The Mekong River Delta has also benefited
from the expansion of cultivated areas by constructing high dikes that allow triple rice cropping,which explains the widening gap between production and yield (Tsukada et al., 2023; Vu et al.,2022).
Since Vietnam began to industrialize in the 2000s, the rural economy has undergone a
structural transformation with high and increasing factor reallocation across farms (Ayerst et al.,2020; Liu et al., 2020). Increased non-farm income opportunities attracted young household
members, leading to an aging of the agricultural labor force. In response to these changes,
agricultural policies since 2010 have promoted structural reforms for agricultural development,
including consolidation of farmland, mechanization, digitalization, expanded cultivation of highvalue and safe products, and promotion of environmentally sustainable agriculture.
2.3. Fertilizer market
Vietnam used to be largely self-sufficient in phosphate, but depended on imports for nitrogenand potassium (Figure 2). With the introduction of the doi moi policy in 1986, fertilizer use
increased significantly, which improved rice production and yields (Figure 1). State-owned
enterprises in Vietnam responded to this increase in fertilizer demand by increasing nitrogen andphosphate production. Self-sufficiency in nitrogen has increased over time, while self-sufficiency
5

in phosphate has gradually decreased. The country remains completely dependent on imports forpotassium.
In the 1990s and 2000s, several large-scale state-owned enterprises and many small fertilizer
producers emerged. According to newspaper reports, the number of fertilizer producers in the
country increased to 300 in 2009, and the number of fertilizer products distributed domesticallyreached 3,000 (Công, 2009). In 2017, the number of fertilizer producers further increased to 706,with a total production capacity of 28.5 million tons per year, while the number of fertilizer
products exceeded 14,000, of which 12,000 were NPK-fertilizers. However, the supply of DAP(diammonium phosphate) is still dependent on imports as domestic production does not meet thedemand in terms of quantity and quality. The domestic supply of NPK, urea, and phosphate, which
accounts for about 70% of fertilizer demand in Vietnam, exceeds domestic consumption (Bùi,2019: 18-19; Vũ, 2018). Large-scale state-owned enterprises belonging to either the Vietnam
National Chemical Group (VINACHEM) or the Vietnam Oil and Gas Group (PVN) and fourother large enterprises (Appendix Table A1) account for about 95% of the total fertilizer
production in Vietnam (Vũ, 2018). 8
In Vietnam, fertilizer is generally distributed in the following order: producer, agent (đại lý),and retailer (cửa hàng), whether produced by large companies or small producers. Other
distribution channels include direct sales to contract farmers and large farmers, and distribution
through cooperatives, but in order to control fertilizer quality, it is important first to ensure control
in the main distribution channels. 9
2.4. Fertilizer quality in the past
In Vietnam, due to the requirement to label nutrient content on packaging, we consider
fertilizers to be low quality if the nutrient content is less than the label and substandard if thecontent is more than 10% deficient (see Section 3.1). An increase in the number of fertilizer
producers and products has led to difficulties in quality control. As summarized in Table 1, several
Bùi (2019: 18) notes that in 2018, 10 large-scale state-owned enterprises belonging to either
VINACHEM or PVN accounted for the majority of annual fertilizer production. Moreover, An
Giang officials admitted that about 70 percent of fertilizer products distributed in the province
were products of large-scale enterprises (interviewed on August 22, 2019).
9
Mano et al. (2023) provide a detailed description of the fertilizer distribution channels in
Vietnam.
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newspaper articles reported the results of fertilizer quality inspections conducted by central or
local government agencies. It appears that low-quality fertilizers have been prevalent in themarket for more than a decade. Violations include missing ingredients as well as fake packaging
of well-known brands (BBC, 2020; Minh, 2019), counterfeiting with silicone (Minh, 2018), anddisguising the country of production (BBC, 2020). 10
Proposed reasons for low-quality fertilizers include insufficient knowledge and technology ofincompetent producers (Minh, 2018; Nguyễn, 2013), collusion between producers and retailers(Khánh, 2017), 11 importation of low-quality/fake fertilizers (Bá 2018), corruption in authorizedorganizations that conduct fertilizer testing required for distribution approval (Bá, 2018; Chung,2017), 12 insufficient penalties for the production and distribution of low-quality/fake fertilizers(Khánh, 2017), and cheap taste of farmers, especially in remote areas (Minh, 2019). Nevertheless,
Table 1 shows that the probability of finding low-quality fertilizers in various inspections has
decreased over the past decade, especially since 2018, suggesting that overall fertilizer quality
has improved.

3. Government control
This section documents initiatives to control fertilizer quality. We first review the government
policies on fertilizer management and then describe market responses. The information in thissection is based on our detailed review of the relevant regulatory framework and in-depth
interviews with government officials, fertilizer retailers and wholesalers, large-scale producers,
farmers, and cooperatives in Can Tho City and An Giang Province in the Mekong Delta , as well
In 2015, an inspection by the National Steering Committee 389 revealed that Thuan Phong
Company, a fertilizer manufacturing company in Long An Province, had been producing fakefertilizer under the trademark VITOL and disguising the country of production as the US. Oncethe details of the violation were revealed, the Long An Provincial Public Security Department
considered the case closed and decided not to prosecute. The farmers’ association, the fertilizer
association, and several members of the National Assembly have called for severe punishment
under the law, but no action has yet been taken (BBC, 2020; Hoàng, 2020; Lê, 2020).
11
According to Khánh (2017), a local government official in Vinh Long province noted thatsome agents order low-quality products from producers and profit together.
12
According to Bá (2018) and Chung (2017), there have been cases where the authorizedorganizations that conduct fertilizer testing and issue certificates, which are supposed to be
responsible for stopping the distribution of substandard products, issue certificates for fertilizer
products that do not meet standards, in exchange for bribes.
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as soil scientists and fertilizer experts in Hanoi. The interviews were conducted in August 2018
and August 2019. Retailers and farmers were introduced by local government officials, following
standard research protocols in Vietnam.
3.1. Current regulations
At the time of the most recent interviews (August 2019), the regulatory framework forfertilizers in Vietnam consists of three points, based on Decree 108 of 2017 (108/2017/NĐ-CP).
First, a license or certification is required at all stages of fertilizer production, distribution, testing,import, and sampling inspection. Table 2 summarizes the details. The licensing system requires
the product to meet a certain quality standard, producers to have a certain facility, retailers to beknowledgeable about the fertilizers and their use, and inspectors to be trained in sampling.
Organizations involved in certification must be accredited as conformity assessors.
Second, Decree 108 (Article 34) requires fertilizer products to label and disclose the nutrient
content in accordance with Decree 43 (43/2017/NĐ-CP), which establishes general productlabeling requirements. The content of the label should not differ from the content certified withthe distribution approval.
Finally, these regulations are enforced through sampling and inspection. Decree 108 provides
detailed procedures. Sampling must be performed by a person holding a fertilizer sampling
certificate. In addition, the fertilizer sample must be tested by a laboratory designated by the“authoritative state management agencies (cơ quan quản lý nhà nước có thảm quyền chỉ định)”using the specified testing method. Decree 108 also defines the lower limit of ingredient content
associated with the registered content by the type of fertilizer. For example, NPK and DAP must
contain more than 90% of the registered content of each nutrient.
The local government has been heavily involved in fertilizer management under Decree 108.
In An Giang province, several provincial departments conducted 11 fertilizer, pesticide, and seed
inspections at 27 producers and retailers in the first half of 2018. Five fertilizer samples werecollected for laboratory testing, and two did not meet quality standards.13 Violations are usuallyreported to the Department of Plant Protection (Cục Bảo về thực vật) of the Ministry ofAgriculture and Rural Development (MARD) (hereafter, MARD-DPP) at the national level.

Based on a report prepared by the Plant Protection Sub-Department of the Department ofAgriculture and Rural Development (DARD) in An Giang province on June 12, 2018.
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Violating fertilizer products are recalled, and their producers/retailers are punished at theprovincial level where they are located.
3.2. Transition of government regulations and limitations 14
Government regulations were updated four times between 2003 and 2019. The firstgovernment decree on fertilizer management (Decree 113, 113/2003/NĐ-CP) was issued in 2003.
The regulations were vague, which caused the following problems. First, because therequirements for starting a fertilizer production business were loosely defined, many small
fertilizer producers without adequate production facilities mushroomed. Second, the approval of
new fertilizers (công nhận phân bón mới) was often obtained through political connections
because the standards for fertilizer testing required for approval were not clear. Third, fertilizer
management was divided between the Ministry of Industry and Trade (MOIT) and the Ministryof Agriculture and Rural Development (MARD). The division of responsibilities between the two
government agencies was unclear, and neither had sufficient information about fertilizer
production, distribution, or import and export.
In 2013, the government issued the new Decree 202 (202/2013/NĐD-CP), which replaced
Decree 113 of 2003. The new Decree was isseded to address the rampant use of illegal andadulterated fertilizers, which occurred in parallel with the rapid increase in the number of smallscale fertilizer producers and products on the market. Decree 202 tightened controls over Decree
113 in the application procedures for fertilizer production licenses (Giấy phép sản xuất phân bón)and specified detailed conditions for the sale of fertilizers. 15
However, other problems remain. For example, a third classification of “other fertilizers” wascreated alongside inorganic and organic fertilizers without a clear definition. In addition, twoseparate ministries managed fertilizer control, with MOIT and MARD both managing inorganic,and organic, and “other” fertilizers. As a result, the number of fertilizer producers and productsThis section is based on Nguyễn (2013), our interviews at the Vietnam Academy of Agricultural
Sciences, Soils and Fertilizers Research Institute in Hanoi (August 30, 2018; August 30, 2019)
and authorities in An Giang province (August 23, 2019).

1415

Decree 202 required fertilizer retailers to: obtain business registration; have stores andwarehouses suitable to ensure fertilizer quality; maintain legal documents verifying the producer,
importer, or distributor of each fertilizer product; and comply with fire prevention, environmental
protection, and occupational safety requirements.
9continued to grow after the issuance of Decree 202, and the problem of low-quality fertilizer
persisted, if not worsened. According to a newspaper report, there were as many as 4,000
violations in 2015 (VNS, 2017).
Decree 108 of 2017 (108/2017/ND-CP), which replaced Decree 202 after only four years,
contains many notable improvements. MARD has become the sole agency responsible for
fertilizer management. Fertilizer categories are clarified with definitions for chemical, organic,
and biological fertilizers. Most importantly, it established detailed regulations for each stage offertilizer testing, production, distribution, and quality management.
Meanwhile, the following issues hinder efficient fertilizer management. First, the regulations
still need to be organized. For example, Decree 108 specifies sampling protocols, but it does not
specify inspection procedures; the Ministry of Science and Technology provided the conditions
for inspection in 2012 and 2017 (26/2012/TT-BKHCN, 12/2017/TT-BKHCN). 16 In addition,
Decree 108 does not contain provisions on penalties for violations. Depending on the type ofviolation, local authorities must comply with three other decrees. 17
Second, the agency responsible for fertilizer management has not been unified at the provincial
level, even though Decree 108 establishes MARD as the sole responsible agency at the national
level. According to our interview in An Giang province, both the provincial-level MOIT (i.e., theDepartment of Industry and Technology (DOIT)) and MARD (i.e., the Department of Agriculture
and Rural Development (DARD)) have the authority to conduct fertilizer inspections. In addition,
the Provincial People’s Committee organizes and sends members to the Steering Committee 389
in An Giang Province. 18 DOIT, DARD, Steering Committee 389, the Department of Market

16

These inspection instructions apply not only to fertilizers, but also to other products sold on themarket.
17

The Decree 185 of 2013 (185/2013/ND-CP) deals with violations of production and sales

activities in general, Decree 119 of 2017 (119/2017/ND-CP) deals with violations of productquality in general, and Decree 55 of 2018 (55/2018/ND-CP) deals with violations ofadministrative procedures in the fertilizer sector. Each decree specifies the form of punishment
according to the type of violation (for example, the amount of the fine, revocation, and suspensionof certificates or approvals for production, sale, and inspection).
18

The Committee is a substructure of the National Steering Committee 389. The National

Steering Committee 389 was established in 2014 pursuant to Prime Ministerial Decision 389

10

Management, and the police conduct inspections without coordination. The frequency ofinspections per retailer is limited to once a year, and to avoid duplication of inspections, theseagencies must identify uninspected retailers.
Third, these complex regulations are further exacerbated by repeated and disorganized policychanges. In November 2019, the government replaced Decree 108 with Decree 84 (84/2019/NDCP). In conjunction with the implementation of the 2018 Crop Protection Law, this policy change
consolidated many related but scattered regulations that were complicated to administer.19 Decree
84 was issued as the implementing regulation for the Crop Production Law, but confusingly,
Decree 84 was accompanied by various implementing regulations. As a result, the complexity of
the fertilizer management system at the local government level was not resolved and may havebeen exacerbated.

4. Market initiatives
We now turn to a description of the market initiatives taken by fertilizer producers and retailers.
4.1. Producers and retailers
Control and compliance. Our interviews with retailers suggest that the regulation and controlof Decree 108 is generally being implemented. Most of the producers and retailers interviewed
are aware of the Decree. All retailers covered by our interview survey held the specified retailer
certificate and were inspected by government officials within 12 months of the interview. The
inspection included the possession of certain licenses or certifications (i.e., retailer certificate andfertilizer specialist certificate) and whether the fertilizers sold had distribution approval.
Branding and reputation building. Producers and retailers improve their reputation andproduct quality in several ways. First, large producers offer retailers a warranty for losses caused
by quality problems. 20 Government authorities may inspect and fine retailers; the warranty covers(389/2014/QD-TT) with the aim of combating smuggling, trade fraud, and counterfeiting.
19

The report was prepared by the Science, Technology, and Environment Committee of the

National Assembly, on May 11, 2018 (858/BC-UBKHCNMT14).
Binh Dien Fertilizer Joint Stock Company states on its website that “Binh Dien is responsiblefor quality at all stages of production, retail, and use.” They have a system to confirm any problem

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any such losses. Some producers have explicit warranty clauses in their sales contracts. Retailers
perceive them as an implicit norm, even if there is no legal basis, at least in contracts with the
major producers.
Second, in order to strengthen branding, some producers have introduced a certification for
the agents in the distribution system. For example, Binh Dien Fertilizer Joint Stock Company, amajor producer with its representative brand “Đầu Trâu,”, grants the Dau Trau dealer certification(Professional Dau Trau fertilizer agent / Đại lý phân bón Đầu Trâu chuyên nghiệp) only to agents
who have received a certain level of training on fertilizer use and have passed the examination.21
The producer expects that this system will help farmers identify trustworthy agents and retailers,
and the producer can be confident that the agent is worthy of selling its products.
Third, in order to verify the quality, the retailers require producers to submit the approval of
distribution for each product in each season, as required by Decree 108. Retailers ask producers
to send a sample of the product before signing a sales contract. Retailers check the color andappearance of the nutrient granules, and some retailers even test the product in their paddy fields.
Fourth and finally, retailers primarily consider brands when selecting products for sale. 22
Farmers are aware of major brands, and brands appear to be a critical factor in product selection,
as we discuss below.
However, retailers are reluctant to deal with new, small-to-medium-sized producers, and theseproducers often engage in aggressive sales with attractive promotions, including reduced prices.
Retailers are concerned that these producers are not trustworthy, that their approvals, certificates,
and licenses may be fraudulent, and that they may not honor warranty terms.
Competition among retailers. Competition among retailers can help eliminate low-quality
fertilizer because farmers can switch to other local retailers if the retailer’s fertilizer assortment
is not attractive. Many farmers interviewed reported having access to multiple retailers, andretailers compete on product variety, credit sales, delivery services, and fertilizer prices. Sincefound at the farmer level within 24 hours (according to an interview at the Long An factory ofBinh Dien Fertilizer Joint Stock Company on August 26, 2019, and the company’s website[https://binhdien.com/gioithieu/about-binh-dien/, accessed on December 8, 2020]).
21
Interview at the Long An factory of Binh Dien Fertilizer Joint Stock Company on August 26,
2019, and the company's website (https://binhdien.com/gioithieu/about-binh-dien/, accessed on
February 28, 2020).
22
Currently, there is no exclusive agency/distributor system in Vietnam, and a retailer can deal
with any fertilizer product from any producer.
12most retailers offer credit sales (payment after harvest) and deliver fertilizer to customers’ paddy
fields (mostly) for free, the product assortment seems to be the most important strategy todifferentiate themselves from other retailers. In deciding which products and brands to stock,retailers pay attention to farmer preferences and change products based on farmer complaints.
Perception of low-quality fertilizer. All of the retailers interviewed said that they had neverencountered low-quality fertilizer. They claimed that they believed the problem of low-quality
fertilizer was prevalent in other provinces, but not in their own. They may have been telling us
the truth, but it is also possible that they did not want to be seen as retailers of low-quality fertilizer
and ruin their reputation.
4.2. Farmers
Perception of low-quality fertilizer. No farmer expressed concern about low-quality fertilizer,
although they were aware of the problem. Most news about low-quality fertilizer problems comesfrom other provinces, and the farmers do not consider it an immediate problem. Vietnamese
farmers use fertilizer intensively, perhaps in part to compensate for reduced nutrient levels(Nguyen 2017: 47). Fertilizer use in the Mekong River Delta has generally increased over time.
However, none of the farmers interviewed cited low fertilizer quality as a reason for intensive
fertilizer use.23
Product choice. Farmers’ choice of retailer appears to depend on the provision of sales credit
and the assortment of products. Distance to the retailer is less critical, as retailers usually deliver
fertilizer to their paddy fields. Farmers are not interested in whether the retailer has the certificatesrequired by Decree 108. Major brands (producers and trademarks) are well known, and farmers
have preferences and loyalty to certain brands.
Quality assessment and social learning. Farmers’ beliefs about product quality are based
primarily on their own experience. Many farmers believe that they can infer fertilizer quality byobserving crop growth, leaf color changes, granular texture, solubility, and country of origin for

Several studies have argued that increased fertilizer use in the Mekong River Delta is due toreduced soil fertility caused by the continuation of triple cropping (Tong, 2017; Tran et al.,2018). However, a recent study using a representative household survey found no correlation
between the continuation of triple cropping and increased fertilizer use or reduced yields(Tsukada et al., 2023).

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imported products. Of course, the accuracy of their quality assessments is questionable. 24
Importantly, beliefs about fertilizer quality are also updated through social learning. Farmers
share information with each other. Local extension workers occasionally recommend specificbrands to farmers. Cooperatives also recommend or even specify some brands when farmers
engage in contract farming. In particular, some farmers share feedback on their quality
perceptions with retailers through regular communication and complaints. These retailers respondto consumer feedback by switching to other producers or products.

5. Discussion and conclusion
5.1. Implications of three initiatives
Based on in-depth interviews, we found the following facts related to the governance offertilizer quality: government control through regulations and inspections; producer reputationbuilding through branding, warranty, and dealer certification; and farmer learning through quality
assessment, information exchange, feedback to retailers, and retailer competition through productassortment. We discuss the implications of these initiatives.
Government control. Government control is a primary and direct intervention. Regulations
consist of standard quality disclosure rules, including licensing and certification, mandatory
quality labeling, and random inspections (Dranove and Jin, 2010). During our interviews, wefound that producers and retailers comply with the regulations.
Meanwhile, several issues remain to be addressed. Regulations need to be better organized, as
rules on sampling protocols, inspection procedures, and penalties are currently complex andscattered across different decrees. The agencies responsible for fertilizer management have notbeen unified and remain uncoordinated. In addition, such complicated policies can be further
complicated by frequent policy changes. The various government agencies can better coordinate
initiatives, collect information on violations, and effectively communicate inspection results tothe market. They can also increase the coverage and frequency of inspections, improve
See Ashour et al. (2019) and Michelson et al. (2021) on how farmers evalute quality and its
inaccuracy. In our context, some farmers determine that fertilizer granules that do not dissolve
immediately are of low quality. However, slow-release fertilizers are intentionally designed todissolve slowly and release nutrients gradually.
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compliance on the government side, and eliminate corruption by falsifying inspection results.
Branding. Producers use two main strategies to build and maintain higher reputations.
Warranty is a well-known measure to commit and signal high quality under asymmetric
information (Grossman, 1981). Authentic dealer certification is valuable in preventing
counterfeiting because counterfeiting dealer certification is more complex than imitating
packaging and logos. 25 The example of dealer certification by Binh Dien Fertilizer Joint Stock
Company described in Section 4.1 helps agents to signal their close relationship with the producer
and their knowledge.
Learning and reputation building. Farmers try to assess fertilizer quality based on
observations. An important contextual difference between Vietnam and SSA is that Vietnamese
farmers have more experience with rice cultivation and related fertilizer use; therefore, they are
expected to infer fertilizer quality better.
The hierarchical social-learning process, in which retailers accumulate farmers’ fertilizer
quality ratings and decide on product assortments, may eliminate “bad” products from the market
faster and more effectively than farmers’ individual learning by more accurately evaluating
quality signals due to the law of large numbers (Bold et al., 2017). This hierarchical social learning
also differs from ordinary decentralized social learning, in which each farmer decides which
product to use based on the information shared within social networks. In hierarchical social
learning, retailers accumulate and aggregate a larger number of signals from farmers, allowing
them to make more accurate quality inferences than individual farmers. Retailers thus play therole of a centralized information “expert” in detecting product quality and eliminating low-quality
products from the market by deciding which product to sell (Biglaiser, 1993; Biglaiser andFriedman, 1994). 26
5.2. Policy implications
Vietnam’s experience offers several lessons for other countries. First, the government should
implement the “standard” regulatory package of licensing, certification, mandatory quality
labeling, and random inspections. Learning from farmers’ experiments alone that the fertilizer isunprofitable can be slow and uncertain if nutrients are only moderately diluted, which could create
Producers can easily verify and detect dealers who falsify a dealer’s certification. Consumers
can also check that the dealer is certified by reviewing the published list of certified dealers.
26
Moreover, government inspection results also provide reliable signals.
25

15

an equilibrium in which low-quality products persist in the market (Bold et al., 2017). Inspections
are essential to eradicate the problem. These regulations must be enacted and implemented
through sufficiently frequent and intensive inspections. This requires a specific administrative
capacity.
When such administrative capacity is limited, the role of market initiatives becomes more
relevant. The Vietnamese case suggests that reputation building is possible throughentrepreneurial efforts such as warranty and certification of authentic dealers. Competition amongproducers can help farmers identify poor-quality fertilizers by comparing products (Björkman
Nyqvist et al., 2022).
Government regulations complement market initiatives. Quality standards, labelingrequirements, and third-party inspections strengthen producers’ reputations and signaling. It isalso critical for consumers to be able to verify producers’ quality claims, as trademarks identify
each product but do not reveal the quality. Governments should also support the protection of
intellectual property rights, such as trademarks, to prevent counterfeiting.
Accelerating the quality of learning can also help build a reputation. One primary approach is
to increase the frequency of on-site inspections. Accepting inspection requests from farmers can
speed up detection, as suspicious products are more likely to be requested for testing. 27 Training
and dissemination of information on quality detection methods to farmers, facilitated by extension
officers, can be helpful in promoting self-learning.
As new fertilizer producers, distributors, and retailers continue to enter the market, it is also
critical to require appropriate skills and facilities, and to provide technical assistance and training.
In Vietnam, the government requires these entities to have relevant education, knowledge, skills,
and facilities, and to obtain and renew certificates and licenses, while providing training tofertilizer retailers.
5.4. Limitations and directions for future study
Given the scope and descriptive nature of our approach, we do not make causal claims about
the effectiveness of the observed initiatives. Rigorous evaluations of specific policies, such as
those for the e-verification programs, are needed (Gillgan et al., 2019). Nevertheless, theRequested testing, in which anyone can request nutrient testing at a low cost, was introduced
in prewar Japan (Matsumoto and Sakane, 2017). Producers and retailers demanded testing forsignaling purposes, while buyers (mostly farmers’ associations) demanded quality verification.

27

16

initiatives studied here are standard and have been implemented in many developed countries.
While a thorough comparative study is warranted, we believe that a combination of directgovernment control and market initiatives is essential. In this regard, the results of Mano et al.
(2023) are suggestive. They find that although there is large variation in actual nutrient content
between samples and between nutrients within a sample, nutrient labels are on average reliable in
the Mekong River Delta, even for the unbranded fertilizers. Given that quality cannot be
maintained by reputation for unbranded products, this suggests that regulation plays a critical rolein controlling quality.
Future studies could examine policies that induce and support market initiatives under limited
administrative capacity, typically in developing countries. Frequent inspections, theirannouncement, and third-party quality testing services (Saenger et al., 2014) are potential
candidates for such policies.
The case of SSA remains a puzzle. Recent studies argue that the problem lies in the farmers’persistent misperception of fertilizer quality despite its good quality. Future studies are expected
to clarify whether fertilizer quality is indeed good and, if so, how the quality problem was solved
when social learning is dysfunctional (because farmers have misperceptions about quality) andthe government regulation is ineffective (Michelson et al., 2021).

17

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Table 1. Newspaper reports of low-quality or counterfeit fertilizers
Reference
Công (2009)

Quang (2010)Nguyễn (2013)

Khánh (2017)

Minh (2018)
Phan (2018)

Hoàng (2019)

The ratio of low quality/fakefertilizer
435 (47.18%) out of 922 fertilizer
products did not meet the standards.

419 (48.8%) out of 859 sample
fertilizers did not match theingredients on the package,
especially 58% of the inorganic
fertilizers (mainly NPK).
Up to 41% of sampled fertilizers
did not match the labeledingredients in all three factors of
NPK.
69 (over 40%) of 158 sample
fertilizers did not match the labeledingredients.
306 (21.5%) out of 1420 sample
fertilizers and pesticides were inviolation.
12 (24%) out of 50 sample
fertilizers did not meet the
ingredients listed on the package,and two products were counterfeit.

Evidence

Information source

In 2008, 4434 fertilizer
producers and distributors
were inspected in 22
southern provinces.
In 2009, the sample tests
were conducted in 17
southern provinces.

Aggregate (incomplete)data from 22 provinces

In 2011, sample tests wereconducted on several
producers and distributors
nationwide.
In 2014, 158 sample
fertilizers were tested in Tra
Vinh Province.
In the first quarter of 2018,
1420 fertilizer and pesticide
products were inspectednationwide.
In the first half of 2019, 50
sample fertilizers were
inspected in Long An
Province.

Ministry of Industry andCommerce

Source: Prepared by the authors.

24

Aggregate data reported
by 17 provinces

Department of Industry
and Commerce of Tra
Vinh Province
The National Steering
Committee 389

The Department ofMarket Management ofLong An ProvinceTable 2. Main licenses and certificates for fertilizers
License/Certificate
Distribution permit (côngnhận lưu hành)Required for
Fertilizer distributor

Fertilizer producer license(Giấy chứng nhận đủ điềukiện sản xuất phân bón)Fertilizer
retailercertificate (Giấy chứng
nhận đủ điều kiện buôn
bán phân bón)Fertilizer producer

Fertilizer
specialist
certificate (Giấy chứng
nhận bồi dưỡng chuyên
môn về phân bón)Fertilizer
sampling
certification (Giấy chứng
nhận tập huấn lấy mẫu
phân bón)

Sales manager
fertilizer retailer

Fertilizer retailer

Sampling specialistofaRequirements
Issued by the Department of Plant Protection (Cục Bảovề thực vật) of the Ministry of Agriculture and Rural
Development (MARD) (hereafter referred to as MARDDPP).
The approval is valid for five years and must be reapproved three months before expiry. Field tests are
required before approval and the test procedure is
specified in detail. The tests may only be conducted byorganizations that meet certain conditions and are
accredited by the MARD-DPP.
Issued by MARD-DPP.
All producers must meet the specified criteria for
production facilities and personnel.
Issued by the Sub-Department of Plant Protection,
Department of Agriculture and Rural Development at theprovincial level.
The requirements for the retailer certificate include
certain sales facilities and the requirement that a person
in charge of selling fertilizers must obtain the fertilizer
specialist certificate.
Complete a 3-day training course unless they have a
specific educational background in horticulture, plant
protection, soil, fertilizer, or agronomy.
Complete a 5-day training course.

25

4

Index: 1980 = 1

3

2

1

0
1960

1970

1980

1990

2000

Year
Production

2010

2020

Yield

(a) Paddy production and yield (1980 = 1)

40

Index: 1980 = 1

30

20

10

0
1960

1970

1980

Nitrogen (N)

1990

Year
Phosphate (P)

2010

2000

2020

Potash (K)(b) Fertilizer use (1980 = 1)
Figure 1. Trend of paddy production, yield, and fertilizer use in Vietnam
Source: FAOSTAT.
Note: Fertilizer use indices are calculated based on the amount of nitrogen (N), phosphate (P2O5)
and potassium (K2O) applied per cropland area (kg/ha). 2.3. Fertilizer market and distribution
channels

26

Self sufficiency

1

.5

0

-.5
1960

1970

1990

1980

Nitrogen (N)Year
Phosphate (P)

2010

2000

2020

Potash (K)Figure 2. Fertilizer self-sufficiency
Source: FAOSTAT.
Note: Fertilizer self-sufficiency is defined as the difference between agricultural use of fertilizer
and fertilizer imports divided by agricultural use, where agricultural use and imports are reported
in quantity (tons).

27

Appendix
Appendix A.
Table A1. Major fertilizer producers in Vietnam
Name of company

Main products and capacity(thousand ton/ year)
Vinachem Group

Brand

EstablishedYear

Habac Nitrogenous Fertilizer & Chemicals Company Limited

Urea (500)

Ha Bac1959

Binh Dien Fertilizer Joint Stock Company

NPK (1050)

Dau Trau

1973

Urea (560)
NPK, Superphosphate,
Organic (450)
FMP (300), NPK (150)

Ninh Binh

2011

Con O

1976

Van Dien

1963

NPK (750), Superphosphate (750)

Lam Thao

1962

FMP (300), NPK (200)NIFERCO1977

Can Tho Fertilizer & Chemical Joint Stock Company

NPK (300)

Co Bay1977

DAP-VINACHEM Joint Stock Company

DAP (330)

DAP

2008

DAP2-VINACHEM Joint Stock Company

DAP (330)

DAP Lao Cai

2008

Ninh Binh Nitrogenous Fertilizer Ltd. Company
Southern Fertilizer Corporation
Van Dien Phosphate Corporation
Lam Thao Phosphate and Chemical JSC
Ninh Binh Phosphate Fertilizer Joint Stock Company

PVN Group
PETROVIETNAM Fertilizer and Chemicals Corporation

Urea (800)Phu My2003

PETROVIETNAM Ca Mau Fertilizer Joint Stock Company

Urea (935)

Ca Mau2011

Other
Five Star International GroupNPK (300)

Nam Sao

1999

General Materials Biochemistry Fertilizer Joint Stock Company

NPK (360)

Hoa Sinh (HIS)2005

Baconco GroupNPK (200)

BACONCO

1996

Japan Vietnam Fertilizer Company

NPK (350)

JVF

1995

Source: Website of each company (accessed on March 14, 2023), Bạch (2021).

28