Clean food and organic food are gradually becoming the favored choice in the context of increasingly rampant dirty food sources. Vietnam is known as an agriculture-based country but its agriculture potential is still untapped. Seeing this potential, many businesses have been promoting investment in agriculture by deploying large farms, shaping a new trend - an agricultural real estate market.
Revenue is still not commensurate with potential
Population growth and urbanization has led to rising consumer demand, especially in food. Statistics show that in the period of 2011-2015, the food market in Vietnam had the highest growth rate in the ASEAN region with 15.4%, while the regional average was only below 10%. As forecast, by 2020, Vietnam's food consumption market is still the highest in the region.
Currently, about 48% of the population in Vietnam is engaged in the agricultural production but according to the statistics of the first six months of 2018, the whole agriculture industry only contributed 14.5% of GDP with about 42,000 businesses operating in the agricultural sector (accounting for about 8% of the total number of enterprises nationwide). In which, 92% are small and super small businesses; the number of large enterprises accounts for less than 6%. Thus, it can be seen that the growth rate as well as the level of investment in this industry is still not commensurate with its potential and strength.
According to experts, there are many reasons for this situation. In particular, the main reason is the lack of land for agricultural development. According to the World Development Index (WDI), the ratio of agricultural land per capita in Vietnam is only 0.07ha/person, while other countries in the region such as Thailand reaches 0.27ha/person. Although the rate of land is low, the structure of land resources is also becoming an obstacle when the average number of plots per household is high, reaching 3.1 pieces per household, which increases the costs for businesses because the cost of renting or transferring land use rights increases. This is a barrier that many businesses don’t want to invest in agriculture.
Many difficulties
Currently, a company which wants to promote investment in high-tech agribusiness has to collect land from many households by acquiring or re-renting it. According to Dr. Vu Dinh Anh, this is considered an agricultural real estate model when the company invests in gathering land for large scale agricultural production.
Thus, the accumulation of land is the process of shifting land use rights with market factors, farmers and businesses must calculate benefits in terms of market mechanism. However both sides face many difficulties in reality.
Farmers have inefficient land but do not want to transfer their land because they will no longer have production tools and have no job conversion, besides, land transfer depends on the determination of the whole family including many people and generations. Therefore, the current major trend is leasing, not selling land.
For businesses, investing in high-tech agriculture requires a large amount of financing, while it is difficult to negotiate with too many farmers. The lease term not only does not meet the conditions for capital recovery but also has risks related to lawsuits, civil disputes in the lease of land.
Much room for growth
According to the Land Law 2013, the quota for receiving annual land use rights for households must not exceed 10 times the quota of land allocation, which makes it difficult for transferee. In many cases, farmers must ask someone else to be named on the certificate of land use right transfer, the area exceeding the limit will not be mortgaged to get a bank loan. On the other hand, people who do not directly produce, despite having capital, technology and market, are not allowed to transfer agricultural land use rights. This is said to not encourage the accumulation of land, hindering businesses when they want to invest in large scale agriculture.
These shortcomings are gradually being removed when at the end of 2017, the Ministry of Natural Resources and Environment submitted a proposal to the Government on the plan on amending and supplementing some articles of the Land Law. In which, there is a change in the above provisions.
In addition, Decree 57/2018/ND-CP on policies to encourage enterprises to invest in agriculture and rural areas, promulgated by the Government in April 2018, also gives incentives to businesses such as exemption from land rent, cut administrative procedures, interest rate support, training support.
Currently, some provinces and cities have developed their own policies to attract businesses to invest in agricultural real estate. Ha Nam province has developed a district and commune government mechanism that will lease land from people for a duration of 20 years, then the province will directly sign a contract with enterprises to re-lease the land while the people still hold their land use right certificates. Ha Nam has also piloted the province's budget to pay 20-year land rent, while re-leasing enterprises only have to pay rent for the first 10 years after signing the contract and pay the rest in 10 years later. With this policy, Ha Nam has planned 6 hi-tech agricultural zones with 654.7 hectares of land.
Potential in the field of agricultural real estate has attracted many large enterprises to participate in this market, including names such as Vingroup, Novaland, Masan, Himlam, FLC, Hoang Anh Gia Lai, Viettel. These groups have stepped up investment in agriculture, applying modern production processes, and using advanced technology that has brought positive initial results.
Dr. Vo Tri Thanh said: “I think that the prospect of the agricultural real estate market is huge, it can even create a breakthrough in the coming time. With the development potential of Vietnamese agriculture, this is a worthy field for investors to bet.”
Luong Tuan
Vietnamese
