One reason that Vietnam’s agricultural product value is 15-50 percent lower than the same products from other countries is its small and outdated processing industry. This was shared by Minister of Agricultural and Rural Development Cao Duc Phat at the workshop themed "Fostering Agro-Industry: Opportunities and Challenges", recently held by the International Support Group (ISG) in Hanoi.
Processing industry not strong enough
Nguyen Trong Thua, Director of Agro-Forestry Processing and Salt Industry Department, MARD, said in his report that the agricultural processing industry of Vietnam accounts for about 20 percent of GDP in the whole processing industry. The annual growth rate of the sector is approximately 7.44 percent. Processing of agricultural products on an industrial scale has generated 1.5 million direct jobs, with an average income of about VND3.5 million / month and tens of millions of jobs in materials production and services.
According to a survey of agricultural products processing enterprises in 2013, in 12 sectors (rice, coffee, rubber, tea, cashew, sugar cane, vegetables, pepper, meat, seafood, food livestock and woodworking) there are 6,610 businesses and thousands of families working in the field of processing.
Vietnam has strength in agricultural industry, but fails to take advantage of this strength. According to Nguyen Trong Thua, the agro-industry of Vietnam has not received proper investment. It uses outdated technology and does not have many refined products or produce high added value products. Typically, many agricultural products exported from Vietnam have high position in the market (in number), but participate in global supply chains in the low value-added segment.
Challenges identified
The first challenge clearly stated in the report is that Vietnam's agriculture sector does not guarantee a stable quality or quantity of raw materials. Because raw materials are procured from small farmers with no guarantee of moisture and nutrient ratio, and fishery products use antibiotics in aquaculture processing, Vietnam agricultural products can hardly achieve a breakthrough in quality output.
Meanwhile, the agro-processing technology is backward. It does not focus on technological innovation so Vietnam’s agricultural products are mainly crude and simple. Low quality products account for a large proportion. Many of them pose potential risk of food insecurity. The production costs are high but the prices are very low.
Other major challenges are that the agricultural processing industry of Vietnam is slowly restructured towards increasing the added value; the use of waste or by-products has not been paid adequate attention; supporting industries must avoid product delays; Information and market orientation is inadequate; and Trade and commercial infrastructure is weak and not adequate to actively traded in the regional and global markets.
Opportunity
In order to enhance added value and move "made in Vietnam" agricultural products further into the global supply chain, foreign experts attending the workshop emphasized that in the agriculture, forestry and fisheries processing sector, Vietnam needs to restructure the sector with the pivot of market; restructure the production area with the pivot of advantages and restructure the products with the pivot of added value. It is aimed that by 2020, the value added of agriculture, forestry and fisheries sectors will increase by average 20 percent compared to the present, focusing on sectors with competitive advantages such as: rice, coffee, rubber, seafood and tea.
Mr Henning Pedersen, IFAD’s Country Programme Manager, said: "Along with the application of scientific and technological advances in processing and storage, the government should also offer incentives for businesses to widely adopt international standards in order to best meet the requirements for quality and food safety; creating significant changes in the quality and overcoming the technical barriers of the import market."
Talking about the opportunities of agro-processing industry in Vietnam, Minister Cao Duc Phat said: In June 2013, the Prime Minister approved the project "Restructuring the agricultural sector towards improving added value and sustainable development." Ministry of Agriculture and Rural Development issued the scheme and action plan "Improving added value of agricultural and forest products in processing and reducing post-harvest losses" and the action plan for restructuring different fields like public investment, science and technology, crop, livestock, fisheries and forestry.
With a view to taking the market as the starting point to promote, adjust the allocation of resources in the manufacturing sector, the Ministry encourages businesses to invest further in the segment with high added value such as processing, trade in the value chain of agricultural commodities, apply science and technology, particularly modern technology to quickly transfer products structure into deep processing. Improving competitiveness is regarded as a spearhead.
To improve the investment environment, the agriculture sector is trying to create an environment for fair competition between state enterprises and private sector; focused on building the infrastructure to support the development of agro-industrial clusters; issuing policies to encourage investment in less developed regions, issuing mechanisms to incorporate farmers in the supply chain and policies to equally distribute the product value chain.
Vietnam is increasingly integrated deeper and wider in the world economy. The opportunity for developing the agro-processing industry is very clear. Not just businesses and investors, but even regulatory agencies should also accompany businesses to overcome challenges and seize this opportunity, said Minister Cao Duc Phat.
Thanh Yen
Vietnamese
