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FDI in Vietnam’s agricultural sector remains low
The Hanoitimes – Foreign firms invested US$3.5 million in 514 agricultural projects until February 2018, accounting for only some 1 percent of the sector’s total investment capital, reports from the Ministry of Planning and Investment (MPI) showed.
According to the ministry, the foreign direct investment (FDI) capital to the agricultural sector represented only 0.5 percent and 0.4 percent of the sector’s total investment capital in 2014 and 2016. The figure for 2015 and 2017 was 1 percent and 1.1 percent, respectively.
Along with the modest FDI inflows to the agricultural sector, the size of the FDI projects are also small, focusing on processing aquatic products and fruits in some provinces.
Until now, there are no foreign giants investing in hi-tech and large-sized organic projects in Vietnam’s agricultural sector, according to the MPI’s reports.
The government puts high expectations on green and clean agriculture, considering it a driving force to boost the country’s growth, however, investment to the sector remains modest. The sector currently ranks 12 and 10 in terms of the number of projects and the investment capital among all sectors.
Nguyen Van Toan, Vice Chairman of the Association of Foreign Investment Enterprises, said the FDI attraction into the agricultural sector was recently improved but foreign investors still go behind domestic enterprises.
Experts attributed the low FDI inflows to the agricultural sector to the reasons that investment in agriculture has high risks because it is directly affected by weather, natural disasters and epidemics. Therefore, many domestic and foreign businesses are hesitant to invest in this sector if they do not have enough strength in technology and capital sources.
According to Nguyen Trong Nghia, director of Sunstar Lacto Vietnam, the potential of Vietnam’s agricultural sector is very large but it just stops in the Government’s policies and directions in calling for businesses to invest in the sector.
In addition, Nghia said, the profit margin in agricultural and rural sectors is very low while doing business in this sector faces many risks because of having to depend too much on weather conditions.
However, according to the MPI’s Foreign Investment Agency, the reason making it difficult for Vietnam agricultural sector to attract FDI inflow is the fragmentation of the sector despite its huge potential.
According to some experts, the bottleneck of agricultural sector will be removed if policies in tax, land and capital have changes.
Proposing one of the methods that may help FDI businesses invest more easily in agriculture sector, representative of the Japan External Trade Organization (JETRO) said the biggest difficulty in investing in agriculture is to secure agriculture land fund. However, this land fund and related procedures are rather complicated.
If local leaders care about and have plans to reserve an agricultural land fund for foreign investors, the businesses will be easier to decide to invest in agriculture, it said.
According to Deputy Minister of Agriculture and Rural Development Ha Cong Tuan, the sector will try to inch up its GDP growth and export turnover plans to 3.05 percent and US$40.5 billion this year.
The government this year entrusted the ministry to gain a GDP growth rate of 3 percent and export value of $40 billion.
The ministry said the national export value of farming, forestry and fishery products in the first two months of this year reached $6.1 billion, a year-on-year increase of 30.2 percent. Of the total, the export value of primary agricultural products was estimated at $3.3 billion, up 27.8 percent annually, while the export revenue of aquatic products was reported at approximately $1.2 billion, up 29.5 percent against the same period last year.
Until now, there are no foreign giants investing in hi-tech and large-sized organic projects in Vietnam’s agricultural sector, according to the MPI’s reports.
The government puts high expectations on green and clean agriculture, considering it a driving force to boost the country’s growth, however, investment to the sector remains modest. The sector currently ranks 12 and 10 in terms of the number of projects and the investment capital among all sectors.
Nguyen Van Toan, Vice Chairman of the Association of Foreign Investment Enterprises, said the FDI attraction into the agricultural sector was recently improved but foreign investors still go behind domestic enterprises.
Experts attributed the low FDI inflows to the agricultural sector to the reasons that investment in agriculture has high risks because it is directly affected by weather, natural disasters and epidemics. Therefore, many domestic and foreign businesses are hesitant to invest in this sector if they do not have enough strength in technology and capital sources.
According to Nguyen Trong Nghia, director of Sunstar Lacto Vietnam, the potential of Vietnam’s agricultural sector is very large but it just stops in the Government’s policies and directions in calling for businesses to invest in the sector.
In addition, Nghia said, the profit margin in agricultural and rural sectors is very low while doing business in this sector faces many risks because of having to depend too much on weather conditions.
However, according to the MPI’s Foreign Investment Agency, the reason making it difficult for Vietnam agricultural sector to attract FDI inflow is the fragmentation of the sector despite its huge potential.
According to some experts, the bottleneck of agricultural sector will be removed if policies in tax, land and capital have changes.
Proposing one of the methods that may help FDI businesses invest more easily in agriculture sector, representative of the Japan External Trade Organization (JETRO) said the biggest difficulty in investing in agriculture is to secure agriculture land fund. However, this land fund and related procedures are rather complicated.
If local leaders care about and have plans to reserve an agricultural land fund for foreign investors, the businesses will be easier to decide to invest in agriculture, it said.
According to Deputy Minister of Agriculture and Rural Development Ha Cong Tuan, the sector will try to inch up its GDP growth and export turnover plans to 3.05 percent and US$40.5 billion this year.
The government this year entrusted the ministry to gain a GDP growth rate of 3 percent and export value of $40 billion.
The ministry said the national export value of farming, forestry and fishery products in the first two months of this year reached $6.1 billion, a year-on-year increase of 30.2 percent. Of the total, the export value of primary agricultural products was estimated at $3.3 billion, up 27.8 percent annually, while the export revenue of aquatic products was reported at approximately $1.2 billion, up 29.5 percent against the same period last year.
Source: http://www.hanoitimes.vn/investment/2018/03/81E0C329/fdi-in-vietnam-s-agricultural-sector-remains-low/