The model of “four-house” cooperation means that production will be carried out under contracts of world goods production, not just those of Vietnam.  

In fact, if a nation has well implemented the synchronous coordination among farmers and industrial associations and state management agencies in producing and processing farm products, renovating technology and improving products’ quality and competitive edge, it will become a powerful exporter of agricultural products. In Vietnam, after four years of implementing the government Decree 80 on promoting the model of “four house” cooperation and encouraging businesses to sign contracts to purchase products from farmers, cooperation between the “four houses” remains poor.

In fact, although Vietnam ranks first and second in exporting products such as cashew nuts, pepper, rice and coffee, farmers carry out agricultural production on a small-scale with 0.7 hectare per household on average. It is not easy for businesses to sign contracts with thousands of households and they have to purchase products through traders as farmers who engage in small-scale production do not need to sign a “four house” contract. Therefore, many farmers who have already signed contracts with businesses still sell their products to other people at higher prices. For example, the model of “four house” cooperation has not been conducted effectively in Ha Nam province under a project to combine peppermint production with processing of ethereal oil.

In 2004, Ha Nam Pharmacy Joint Stock Company implemented a project to grow peppermint in seven communes of five districts over an area of nearly 40 hectares. Moc Bac commune in Duy Tien district covered the largest cultivation area of 36 hectares.

According to signed contracts, farmers are responsible for selling ethereal oil of peppermint for pharmaceutical companies. In return, pharmaceutical companies function as both scientists and businesses who provide 100 percent of SK33 mint varieties for farmers in their first crop, fertilizer, cultivation and preservation techniques, as well as capital assistance at a zero percent interest rate for two years and purchase the entire volume of farmers’ products.

The first year of implementing the contracts paid off well. However, in the second year, pharmaceutical companies invested in cultivating 126ha of peppermint, and farmers committed to selling 1.5 tonnes of ethereal oil of peppermint. In fact, pharmaceutical companies could buy only 280kg of ethereal oil of peppermint from farmers. These companies attributed the result to farmers’ breaking the contracts, while farmers said pharmaceutical companies bought their products at too low a price and did not adjust purchasing prices in line with market prices so they had to sell to private businesses.

Notably, in 2004 the companies signed contracts with farmers to buy ethereal oil of peppermint at a price of VND145,000/kg while the market price in harvest time was VND160,000-170,000/kg. In 2005, the companies’ purchasing price stood at VND165,000/kg, while market price reached up to VND180,000-190,000/kg, sometimes VND230,000/kg. Furthermore, these companies could not provide farmers with full investment in growing peppermint as their signed contracts dictated, therefore they could not bind farmers legally. Many farmers said they broke contracts to sell ethereal oil directly to pharmaceutical companies even at an excessively cheap price. As a result, after four years of implementation, the model of “four-house” co-operation has failed to change the agricultural production structure in northern Ha Nam province.

By contrast, the supply of sugarcanes in the Mekong Delta region is currently surpassing demand. The average sugarcane price stands at VND180-200/kg, while the production cost is estimated at VND280/kg. Many sugar companies signed contracts to purchase sugarcanes from farmers at a price of VND350-400/kg, but now they are breaking the contracts.

In fact, many economists said most production activities are on a small-scale, purchasing and selling activities are in a haphazard manner and the co-operation between “four houses” is something of a slogan. Now that Vietnam has joined the World Trade Organization, farmers are urged to boost production activities on a large scale by applying the “four-house” cooperation model.