New Mechanisms for Enterprises to Invest in Agriculture

The Ministry of Planning and Investment of Vietnam recently held a national workshop in consultation with the ministries, branches, localities and some businesses in the agricultural and rural sector on the draft circular Decree No 210/2013/ND-CP on policies to encourage enterprises to invest in agriculture and rural development. The new decree is expected to be a big push for agricultural development towards improving the added value and sustainable development.

 

According to Deputy Minister of Planning and Investment Nguyen Van Hieu, the business community plays a vital role in the rural development and agriculture growth. Enterprises also have big influence in production forms, the application of advanced science and technology in agriculture and rural areas. This is the channel directly linking manufacturers with processing and consumption, contributing to enhancing the added value of agricultural production. The issuing of Circular of the Government is a very important premise to specify the content of the investment incentives of Decree 210/2014/ND-CP. However, in order to apply policies in agricultural production, lawmakers need to consider and consult the advice from managers, professionals and the business community.

 

According to Mr Hieu, this new decree partially adds new rules which are more preeminent than previous legislation. Specifically: clearly defining responsibilities of agencies; process of receiving support and preferential conditions; issuing documents of supporting commitment and preferential policy commitment for businesses and other support (training or advertising) are deducted from the cost of enterprises when settle tax without direct support from the state budget; direct support from the state budget to localities being in difficulties to build essential infrastructure. The Decree also defined levels of support for each sector, in particular: The poultry industry (2 billion / scope of the project); livestock, poultry (3-5 billion/ scope of the project); cannabis (15 million/ ha); marine aquaculture (40-100 million / cage); investing for drying facilities, dried seafood products, coffee processing, seafood processing (2 billion / scope of the project); wood processing (20 billion / projects), transportation assistance 1,500 / ton / km); storage and processing of agricultural, forestry and fishery (50% of the cost of building infrastructure in the fence, 70 percent of the cost of building the infrastructure outside the fence).

Besides, according to the Foreign Investment Agency (FIA), the Ministry of Planning and Investment, by the end of April this year, there were about 16,300 licensed foreign investment projects. Registered capital for the first 4 months of the year reached US$4.8 billion, equal to 52.2 percent compared to the same period last year. Particularly there are 520 projects in the field of investment attraction in agriculture, forestry and fisheries with a capital of US$3.3 billion. The majority of foreign – invested projects are concentrated in the Red River Delta region and the Mekong Delta. The figure above shows the percentage of capital into the agricultural sector is significantly smaller than that in other economic sectors despite the fact that agriculture is considered a key sector; processing, production and export of Vietnam have a lot of untapped potentials. Therefore, at the conference, many people think that to attract more investment capital in agriculture, the Government should issue new mechanisms to promote PPP in agriculture. This means that the Government facilitates and supports the tax, land rents, the incentives for not only state-owned businesses but private investors and enterprises as well. Specifically, the PPP strategy in promoting agricultural and rural issues need to be implemented, such as the integration of projects, development programmes, or preferential loans or human resource training.

 

In addition, experts also noted that the nature of businesses is focusing on profit, so they only invest in projects that are beneficial for them. Therefore, Decree 210 can only produce the desired effect once problems in the field of agriculture have been handled such as the fragmentation of production, risks of natural disasters, epidemics, unstable market prices, poor performance in product quality control and food safety, unstable material areas, the breach of contract between farmers and businesses. Besides, this is not just a policy but an orientation which has big impact on the economic structure of many localities and each individual. So, localities should review and adjust production planning appropriate to natural conditions of each region to allocate capital and human resources properly.

 

Collecting opinions of experts, Mr Dinh Ngoc Minh, Deputy Director of the Department of Agricultural Economics of the Ministry of Planning and Investment has recorded a number of questions. For controversial opinions, the drafting committee will study and assimilate in accordance with the Decree and create the most favourable conditions for the business community in the implementation of the Decree. In addition, the Ministry of Planning and Investment also expected to issue Guidance Circular in June 2014.