Does More Capital Mean Higher Growth?

According to Dr Dang Kim Son, Director of Institute of Policy and Strategy for Agriculture and Rural Development (Ministry of Agriculture and Rural Development), compared with other countries, Vietnam’s investment in agriculture is too low with unreasonable structure, with dispersed results and low economic efficiency. Especially, Vietnam hasn’t built up a complete system to cover all stages from input materials, production, manufacturing, storing agricultural products to consumption and export. Thus, there are many goods exported in the form of raw materials, gaining little foreign currency, and not meeting available potential.

 

Recently, in a meeting with the Ministry of Agriculture and Rural Development, Deputy Prime Minister Hoang Trung Hai gave a guideline that in next five years, the industry needs to work out comprehensive and uninterrupted restructuring measures in the direction of increased added value and sustainable development. He also stressed that capital played an important role in restructuring the industry, therefore, besides domestically mobilized capital, attention should also be paid to foreign investment. Especially, the key task is gradually increasing manufacturing value of aquatic, timber and agricultural products and this should be considered a breakthrough, long term measure for stability.

 

In addition to opinions about industrial development orientation, figures about capital increase for agriculture were openly shared by Mr Vuong Dinh Hue, Minister of Finance. Specifically, in national budget allocation estimates for 2012, the Ministry of Finance has coordinated with ministries, departments and localities to continue priority allocation for rural and agricultural development. Accordingly, it is planned that allocation from national budget and government bonds would be VND370,000 billion, increasing by 28 percent against 2011 (national budget expenditure growth of 24.5 percent), equal to 40.9 percent in total national budget expense, in which allocation from the national budget accounts for VND344,000 billion, increasing by 30.1 percent; and that from government bonds accounts for VND26,000 billion, nearly equal to 60 percent of total government bonds (VND45,000 billion). Among those, national budget allocation directly invested in agriculture and rural areas is about VND 12,000 billion, in which the amount for ministries, governmental agencies to invest, maintain irrigation works, spend on agricultural extension activities, and make up for preferential credit interest is approximately VND11,000 billion. Allocation from local budget and addition of national budget to local budget is about VND109,000 billion, mainly focused on irrigation activities, rural transport, forest development and infrastructure investment in needy areas. At the same time, allocation from national budget for investment and implementation of governmental agriculture and rural area related policies is over VND 220,000 billion.

 

Dr Tran Du Lich, member of National Advisory Committee of financial and currency policies analyzed that by 2020, the world’s food demand will double. However, since many countries in the world do not encourage agricultural development, they will inevitably import agricultural products. In future, Vietnam will have great opportunities to bring agricultural products to the world. Accordingly, to develop a strong agriculture, Vietnam needs to have planning measures for concentrated agricultural producing areas, engage these to manufacturing industry and commerce, create “producing complexes”, ensuring the whole products’ value chain. On the other hand, to limit risks for farmers, related agencies should introduce appropriate support policies. Notable among those, is government support through preferential credit policies, and increasing mobilization for domestic and foreign capital to restructure agriculture, said Mr Lich.