Support for the development of the cashew sector in Dak Lak, Vietnam, 2006

Description
Cashew farming in Vietnam has been a lucrative business in the past years. Cashew demand has been steadily growing on the world market; Vietnamese entrepreneurs have been increasingly investing into cashew processing, and farm-gate prices have been extremely good in recent years. The cashew processing industry has undergone a fast development. Up to 1994, Vietnam did not have enough capacity to process all internally produced cashew nuts to kernel. Around 20 % of the raw cashew nuts production was exported to India and other countries for processing. This situation has changed dramatically and as of today, Vietnamese processing facilities exceed the present production and Vietnam imports by around 50,000 to 100,000 tons of raw cashews for final processing to meet domestic capacities. This change from a nuts-in-shell (NIS) exporter to an importer of NIS was important for Vietnam to increase value adding of cashew in Vietnam and to become a direct trading partner to the international cashew buyers rather than only providing semi-processed products. Cashew production in Vietnam is almost entirely carried out by small farmers with holdings between several trees to 5 ha per household. Looking at the total area under cultivation, total processing capacity and total production output in tons, Dak Lak ranks in the mid-range of provinces active in the cashew nuts business.

GTZ is active in Dak Lak through two projects which are implemented under the responsibility of the Department for Planning & Investment Dak Lak Province: one focusing on rural development and another one on the competitiveness of small and medium enterprises. Both projects consider the cashew nut sector in Dak Lak as one with potential to further increasing income to farmers and creating jobs in the processing industry. Albeit the recent success in the sector, there are also issues like sustainable management practices at the farm level and environmental dimensions in the processing companies that need short to medium term interventions in order to maintain the sustainability of the cashew nuts sector in Dak Lak. Additionally, there seems to be potential for further adding value to the cashew nuts by improving product quality, adding further processing steps and working on modern packaging combined with trade mark and brand development in order to market final products on the local and export markets.

Both projects want to further analyze the mentioned issues and potentials in order to come up with joint project implementation strategies for the cashew sector in Dak Lak. Therefore, this study was conducted by a team of national and international experts headed by EDE Consulting Asia Pacific in cooperation with both projects. Locally available technical and institutional know-how was made available through the active participation of provincial experts in the study team from the provincial Departments for Agriculture & Rural Development (DARD) and of Industries (DoI), from the Agriculture Extension Centre (AEC), the Western Highlands Agro-forestry Science & Research Institute (WASI), and from Café Control.

The objectives were:
1. To collect detailed information on the cashew nut sector in Dak Lak comprising the different actors in the value chain as well as describing supportive institutions and policies;
2. To evaluate the feasibility of the intervention ideas as proposed in the EDE study (2005);
3. To discuss these issues with relevant stakeholders and come up with a consensus based intervention strategy (action plan);and
4. To propose mechanisms, policies or adequate solutions to the province as a basis for the development of the provincial cashew development strategy.

Methods for info gathering
The study was carried out in 5 districts in Dak Lak province, i.e. Ea H'Leo, Lak, Krong Ana, Ea Sup and Ea Kar. Particular emphasis was put on coverage of the province's overall variability in the current cashew supply chain. Therefore the study included visits to: (i) small-holder private farmers of both Kinh and ethnic minority origin; (ii) small-holder farmers working for state enterprises; (iii) local collectors; and (iv) private and state owned processors/exporters.