Finding Ways to Attract Investment into Agriculture

10:33:51 AM | 7/16/2021

Despite difficulties caused by the COVID-19 pandemic, Vietnam’s agriculture is a good performer that manages to maintain its supporting role in the economy. However, agriculture has not received proper investment while Vietnam has a great advantage in agriculture.

Outstanding agribusinesses

Vinamilk Corporation has 12 world-class farms across Vietnam and one dairy farm complex in Laos with approximately 150,000 dairy cows, enabling it to supply over one million liters of fresh milk a day. Vinamilk's products are now not only well accepted by domestic consumers but also exported to countries such as Thailand, South Korea, Japan, Turkey, Russia and Canada.

TH Group, another major milk producer, also launched many dairy products. In late 2020, the first batch of TH milk was officially exported to China. This event marked the development of the group and of Vietnam's dairy industry on the world market.

Besides, Moc Chau-based Van Ho fresh fruit and herbal processing factory, invested by TH Group on a 5-ha area in the first phase with VND1,200 billion, is powered by completely natural extraction technology and Italian high-pressure processing (HPP) technology to retain the color, taste and nutritional value of fresh vegetables and fruits. In the first phase, the facility can process 300 tons of vegetables and fruits a day, the largest in the Northwest and one of the leading fruit processors in Vietnam.

Vina T&T Kim Thanh Coconut Factory based in Ben Tre province, operated by Vina T&T Group, enabled the company to more than double its export output. The facility helps preserve fresh coconuts for 80 days, 20 days longer than before, enabling the firm to boost its exports to traditional markets like the United States, Australia, Japan and South Korea.

These are exemplarily successful agribusinesses. Many other projects engaged in purchasing agricultural products, processing vegetables and fruits, producing foods and raising livestock across the country have been implemented, helping restructure the agricultural sector, opening up a new direction for smart agricultural development, improving people's livelihoods, accelerating socioeconomic growth, bringing the value and brand of Vietnamese products to meet the needs of domestic and global consumers.

Slight increase in agribusiness

Over the years, the Government has issued many policies to attract businesses to invest in agriculture like Decree 57/2018/ND-CP dated April 17, 2018 on mechanisms and policies to encourage enterprises to invest in agriculture and rural development with outstanding solutions: Agricultural projects are offered special investment incentives of land rent and water surface rent to be carried out, including a 20% subsidy of land rent and water surface rent in the first five years from the year of project operation or a 60% of investment budget (not more than VND15 billion) for agricultural product processing facility and livestock/poultry slaughtering facility to build infrastructure for waste treatment, transportation, electricity, water supply, factory and equipment purchase.

In addition, Resolution 53/NQ-CP dated July 17, 2019 on solutions to encourage and promote effective, safe and sustainable agricultural investment emphasizes continued institutional improvements, administrative reforms, reduced barriers to agricultural business and agricultural investment.

Thanks to the above policies, Vietnam has a growing force of agricultural enterprises. However, compared with available potential, the agricultural sector still needs more investment from enterprises, especially large ones.

According to the Ministry of Agriculture and Rural Development, 1,055 agricultural companies were established in 2020, totaling over 13,280 enterprises to date. Compared with 134,900 founded in 2020, this figure was still very modest.

How to entice investors?

In order to attract businesses to invest in agriculture, the Government needs to understand their legitimate aspirations and build up their confidence in the administration, said former Minister of Agriculture and Rural Development Nguyen Xuan Cuong. This is a very important solution to attract agricultural investment because they know best about what needs to be dealt with promote agricultural development.

Besides, it is necessary to direct strong and potential Vietnamese agricultural products, foster trade promotion and boost product consumption to provide valuable information for companies seeking to invest in agriculture.

Typically prone to risks of natural disasters and epidemics that wreck performance and profitability of agricultural enterprises, the Government and the agriculture sector need to have practical support mechanisms for businesses in difficult times to build up their confidence in investment in this sector.

Before the serious impacts of the COVID-19 pandemic, the Ministry of Planning and Investment proposed a budget package worth VND8,600 billion to encourage businesses to invest in agriculture and rural development. The investment fund for agricultural development was estimated at VND107 trillion in the 2021-2025 period, including VND8.6 trillion from the State budget, an equivalent to 8% of the total to carry out 800 projects. Thus, if the State fund accounts for 10%, it will attract about VND9 trillion from agricultural and rural development investors.

The Ministry of Planning and Investment hoped that the support level from the State Budget will bring numerous benefits for the economy, society and environment. Assuming that 100 agricultural enterprises are formed each year and each investment project has VND100 billion of investment capital, they will provide at least 10,000 full-time jobs and 30,000 part-time jobs. At the same time, they help expand stable consumption markets for agricultural products, increase the performance of State-funded agricultural and rural development investment to quicken agricultural restructuring.

By Anh Mai, Vietnam Business Forum