In the first half of 2008, we carried out a small scale initial review of the tea sector in Viet Nam and concluded that there is likely to be significant scope to improve farmer incomes through increasing prices at farm gate and yield per hectare, thus achieving good poverty impacts.

Current local industry structures in Viet Nam seem to be a primary cause of the current low prices AND low yield due to the existence of too many small processors and no price signals for different quality. Therefore, tea farmers shun good practice, which ultimately reduces their yield and price/kg.

During 2009, further work is planned to validate these preliminary conclusions, identify specific priorities for achieving poverty impact and test the viability of interventions to achieve these priorities.

Tea production in Viet Nam is primary an upland smallholder activity. There are an estimated 4.9 million people living below the poverty line in the 21 largest tea-producing provinces. While average rural poverty rates for Viet Nam are around 25%, those for tea producers is over 40%, indicating that tea is a sector the poor are involved in.

From an industry perspective, Viet Nam is a small player in the global market, and therefore even relatively large improvements in the productivity of the local industry are unlikely to materially effect the market (i.e. unlikely to repeat the experience of Viet Nam's coffee industry in the 1990's).

Taking these market and poverty targeting perspectives together, Prosperity Initiative has yet to conduct the complete identification and proving work required to demonstrate an actual opportunity to improve the sector, its value creation to the poor and the resulting poverty impact. However, the indicative scale and target is positive, and we are looking for donors to support the continuation of this work.