Farm Produce Processing Industry: Huge Investment Needed

Attracting foreign finance to quicken the development of agricultural product processing industry in Vietnam is becoming urgently important as this agricultural product processing industry is lagging far behind the agricultural production, leading to export of raw agricultural products for many years.

 

Obviously, achievements in agricultural production and export after 25 years of reform in Vietnam are very significant and prideful. However, due to many reasons, the efficiency does not come up with expectations. A prime reason is the lack of investment capital for this sector although prerequisite conditions for effective investment are very good. Thus, accelerating investment for this sector development is very important because of its specially “dual” effect in the process of industrialisation and modernisation of the nation in the coming years.

 

First, according to international statistics over the past 50 years, the area of agricultural land in Vietnam, in spite of ups and downs, has been expanded significantly and reached a record 6.649 million hectares in 2001. But in recent years, the area is around 6.35 million hectares. However, crop area, including annual and perennial crops, increased but at a slower annualised rate, before peaking at 13.949 million hectares in 2009.

 

This means that the land area will hardly increase while a part of current faring land is being shifted for other purposes. Hence, developing extensive agriculture is almost impossible in the coming years.

 

Thanks to its almost full use of land potential, Vietnam has supplied the world market with a respectable volume of agricultural products.

 

First, with respect to rice - the staple that feeds half population of the world, Vietnam became a big rice exporter in the world after only six years, with nearly 2 million tonnes in 1995. In 1996, the country was the world’s fourth largest rice exporter with over 3 million tonnes and secured the second position after that. With 6 million tonnes and 6.7 million tonnes in the past two years, Vietnam’s supplies made up some around 21 percent of the global rice export chart.

 

However, if percentage points are taken into account, pepper and cashew nuts make much more respectable positions. With 57,000 tonnes in 2001, Vietnam not only became the No. 1 pepper exporter in the world but not left behind the second one by a far distance thanks to continuous sharp growth. At present, Vietnam’s pepper export made up a third on the global export chart.

 

Appearing on the world market much later, Vietnam’s cashew nut export sped up very quickly. With 128,000 tonnes in 2006, the country outstripped India - the top exporter in some 50 years before that, to become the world’s largest exporter.

 

Vietnam was also the second largest coffee exporter of the world in 2000. The nation is also a major supplier of tea, rubber and other commodities in the world for years.

 

In spite of positive achievements, we cannot make light of the flip side of medal in exporting agricultural products - shortcomings existing for years.

 

It is clear that most agricultural products exported are raw or simply processed. Possibly, only cashew nuts are deeply processed for export while rubber, coffee, tea and many others are unprocessed or pepper inter alia are simply treated. Besides, Vietnamese agricultural products come in limited categories and grades. Rice - a strategic export - is an example.

 

Weakness at processing in couple with numerous other popular serious shortcomings results to lower-than-the-world-rate prices of Vietnamese farm produce.

 

Perhaps, cashew nut is traded at the world rate prices thanks to downstream processing.

 

The most typical examples are possibly exporting prices in coffee and tea. In the past 10 years, the prices of Vietnamese exported coffee and tea were equal just 51.5 percent and 52.8 percent of the world averages, respectively. Nonetheless, in the past 10 years, the gap of coffee improved thanks to higher global prices while tea prices have plummeted in recent years and currently equal to just 45 percent of the world medium rate. Hence, tea price is the top concern for Vietnam.

 

Clearly, the Vietnamese agriculture is generating two prerequisite conditions for the development of agricultural product processing industry: Stable supply and low prices of materials.

 

Paradoxically, the processing industry has not been available for many agricultural products while it is very simple for some others.

 

Probably, it is time for Vietnam to quickly deal with these shortages because this generates “treble” effects: creating jobs for the current abundant workforce, increasing exports to reduce trade deficit, and perhaps most importantly boosting the sustainable development of the Vietnamese agriculture.

 

Attracting foreign finance to quicken the development of agricultural product processing industry in Vietnam is a very important solution as the Vietnamese agricultural product processing industry is lagging far behind the agricultural production. The outcomes in the past years are clear evidence.

 

Actually, supports from international financial institutions are specially important.