New opportunities open up for agricultural product processing

Investment in processing technology is helping the agricultural sector recover after the pandemic, as well as opening a window of opportunity for Vietnam to achieve its goal of ranking among the world’s top 10 agriculture-processing nations.

Processing agricultural products for export

Rapid processing industry growth

According to Nguyen Quoc Toan, Director of the Agro Processing and Market Development Department under the Ministry of Agriculture and Rural Development (MARD), the agricultural sector has carried out comprehensive restructuring, with a focus on key fields such as processing and reorganizing markets. Agricultural production has made significant progress with the establishment of commodity production areas and more abundant and diversified crops. In addition, enterprises have focused on investing and developing the agricultural processing industry, raising the added value of agricultural products.

In the past 10 years, the value of deeply processed agricultural products has grown 7-8 percent per year and the proportion of the output of deeply processed products has reached at least 30 percent. More than 50 percent of processing establishments of key agricultural products for export have acquired advanced production technology, establishing link clusters of production, preservation, processing and consumption of agricultural products in association with concentrated raw material areas. These developments have contributed to economic growth in rural areas, built new rural areas and solved job problems for farmers.

Vietnam’s new-generation free trade agreements (FTAs) are also providing unprecedented opportunities to expand agricultural exports, especially of processed products. Investment in processing, packaging and storage technologies is also one of the most effective solutions to increase the added value of agricultural products and foodstuffs and tackle the depreciation of Vietnam’s agricultural sector.

Covid-19 has affected the export of fresh fruits and vegetables, especially to China. However, Vietnam has achieved a strong growth in processed agricultural products because the pandemic impact has forced domestic enterprises to change export markets and promote processing of agricultural products. Specifically, instead of exporting agricultural products such as dragon fruit and watermelon, many businesses have shifted to processing, drying and freezing methods for domestic consumption.

The development of the agro-processing industry has not only contributed to a dramatic change in the structure of agricultural production and economic development in rural areas, but has also enabled the development of new rural areas and accelerated the sector’s global economic integration.

Restructuring and investing

According to the Ministry of Agriculture and Rural Development, the total annual export value of processed agricultural products in the world amounts to US$2.2 trillion, providing diverse opportunities for Vietnamese agricultural products.

However, many Vietnamese enterprises have not grasped the opportunity and have been unable to take the initiative in obtaining raw materials in sufficient quantity and of good quality and safety. In other words, the link between the various stages of the value chain from production, processing to consumption is not sufficiently tight.

According to Nguyen Lam Vien, Chair of the Board of Directors of the Vinamit Joint Stock Company, many businesses are investing in modern processing plants and brand development, but most businesses are wholesalers less concerned with production and thus less mindful of product quality.

According to the International Fresh Vegetables and Fruits Production and Supply Joint Stock Company, a subsidiary of the TH Group, a clean vegetable growing area of 500ha in Nghe An and Lam Dong provinces requires large initial investment capital, while the repayment period is quite long, so that many companies are reluctant to invest.

In addition, many businesses have difficulties in finding input products for processing plants, highlighting the need for cooperation with farmers and cooperatives. Localities need to identify key products in order to develop raw material areas, while farmers need to strengthen links with businesses to sell their products.

The Ministry of Agriculture and Rural Development plans to restructure 13 products. The State also has mechanisms and policies to encourage investment in agriculture and gives priority to the processing sector. In addition, enterprises need to not only mobilize farmers to participate in cooperatives and create large-scale agricultural fields to implement mechanization, but also promote attracting investment from the US, Japan, the Republic of Korea, Australia and Israel in order to strongly develop deep processing technology of agricultural products.

Prime Minister Nguyen Xuan Phuc recently issued an instruction that sets out tasks and solutions for developing technology, processing agricultural and forest products and mechanizing agricultural production. According to the directive, Vietnam will strive to become one of the 15 most developed countries in the world in agriculture by 2030 band rank among the top 10 in the world in processing agricultural products.