Creating favourable environment for attracting agricultural investment

The Government has issued multiple preferential policies and support schemes regarding taxes, credit and land use to attract both domestic and foreign investment in agriculture and rural areas. The policies are being implemented right from their promulgation and have been continuously improved towards creating a more convenient environment for investors.

A member of Tam Vu Dragon Fruit Cooperative in Chau Thanh district, Long An province harvests dragon fruits. (Photo: NDO/Le Duc)

An increase in the number of agricultural enterprises

According to reports from the Ministry of Agriculture and Rural Development, the agricultural sector has attracted more and more domestic enterprises to invest in large-scale and high-tech agricultural production models. During the 2005-2016 period, the number of enterprises engaged in production and business activities in the area of ​​agriculture, forestry and fisheries increased from more than 2,000 to over 4,000. In 2017, there were 1,955 newly-registered enterprises in the agricultural sector, bringing the total number of businesses operating in this field to over 5,661 enterprises. If counting those in agro-forestry and seafood processing and commercial food and foodstuff enterprises, the number has increased from more than 12,000 in 2005 to 42,000 up to the present time. Thus, it can be seen that the number of enterprises has increased dramatically in the sector.

In addition to the increase of small and medium-sized enterprises in agriculture, a number of large corporations outside the agricultural, forestry and fishery sectors have also boosted investment in agriculture, such as Vingroup, Masan, Him Lam, Viettel, FLC, Hoang Anh Gia Lai and Pan Group. They also apply modern new technologies to production and have generated initial good results, successfully mobilising foreign capital to develop domestic agriculture, helping enhance Vietnamese products’ competitiveness.

In the past 10 years, the total investment capital in the agricultural sector has quadrupled from VND22 trillion to over VND231 trillion. The average capital size in agricultural enterprises in 2016 was at VND35.8 billion/enterprise (the national average is VND72.82 billion/enterprise).

It can be said that, although being exposed to risks related to weather, climate change and market fluctuations, agricultural enterprises still have stable and somewhat higher efficiency than other kinds of businesses. According to the Vietnam Chamber of Commerce and Industry (VCCI), their return on assets (ROA) in the 2007-2015 period has always reached over 10% compared with 3.4% of the average figure. In addition, return on equity (ROE) reached an average of more than 15%, the highest level in all sectors. This also shows that agriculture is a potential field and there are many good businesses operating in the sector.

The development of agricultural enterprises also plays an important role and contributes greatly in promoting production and exports, and creating jobs for agricultural and rural workers, as well as contributing to the national socio-economic development and social stability. The total number of regular employees working in agricultural enterprises in 2017 was at more than 300,000, accounting for 2.3% of the total number of employees in all businesses across the country. On average, each agricultural enterprise employs 30 employees, higher than the average number of 28 employees per enterprise.

Challenges ahead

The positive results in attracting investment in agriculture have partly inspired the business community, however, the number of businesses, though increasing, still accounts for a very small proportion (at over 1%) of the total number of businesses nationwide. In addition, more than 95% of agricultural enterprises are small and medium-sized, proving a major challenge in improving competitiveness and developing production linkages under the agricultural production chain.

Meanwhile, the capacity in applying science and technology by agricultural enterprises is still low. Also according to the report from the VCCI, up to 75% of enterprises are using machines out of depreciation. Domestic enterprises, especially micro, small and medium-sized, are still struggling to escape machines with outdated technology.

In addition, their cooperation and value chain development capacity is still limited, halting them in seeking linkage with partners to find and access market information, technical barriers and international trade regulations. Businesses only focus on production, while processing and marketing stages are weak, and the link between businesses and farmers or farmers’ representative organisations is unsustainable, unrelated to the interests and responsibilities of the concerned parties.

Solutions to boost investment

According to experts, the Government needs to synchronously implement solutions to accelerate the restructuring of the agricultural sector in association with the innovation of growth models and new rural construction, with the focus on identifying priorities for the sector’s development in to a three main product axis, including national flagship products, provincial key products and local specialties.

It is necessary to give priority to enterprises investing in technology research and transfer in cultivation, animal husbandry, aquaculture and developing plant varieties and breeding, as well as investing in processing and preserving agricultural, forestry and aquatic products and herbs, and promoting administrative reforms to strongly attract enterprises to invest in agriculture and rural areas.

In the future, agricultural enterprises are considered the driving force of agricultural value chains, which will create spillover effects for socio-economic development. The Government has instructed the ministries, branches and localities concerned to continue to promote administrative reforms, reduce unnecessary business investment conditions, improve the quality of the business environment in agriculture, and effectively implement preferential policies and mechanisms to support enterprises to have long-term access to land use, in accordance with the investors' legitimate rights, and enhance rural infrastructure upgrades to facilitate investors implementing their projects.

They have been asked to build a mechanism to encourage investors to develop and join the trading of agricultural and rural infrastructure in many different forms, especially public- private partnerships.