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Planting the seed: Opportunities in Vietnamese agriculture

Vietnam has progressed to become the world’s fifth largest exporter of agro-food commodities, including cashews, coffee, cassava and other products, according to a World Bank report released in 2016. However, while increasing its stature as a global exporter, the quality of growth in the sector overall remains low.



In order to improve it and, in turn, enhance the country’s economic competitive capacity, the Ministry of Agriculture plans to introduce incentives such as tax exemptions or land use fee cuts to attract private investments, especially from overseas investors. At the forefront of this drive are hi-tech agriculture and clean agriculture which will be the two focus fields targeted to start the modernization and diversification of Vietnam’s agriculture sector.

Director of the Institute of Policy and Strategy for Agriculture and Rural Development, Nguyen Do Anh Tuan, commented: “[Vietnam’s] agricultural exports have unprecedented opportunities as a string of free trade agreements between Vietnam and other countries have been or will soon be signed. Investment in this sector is expected to continue rising in the near future.”

International trading opportunities
Having reached a comprehensive free trade agreement with the European Union, Vietnam is expected to take advantage of tariff reductions and other benefits for its many products and services. The demand for Vietnamese agricultural products like cashews, coffee and fisheries have already been high in the EU market, which is also Vietnam’s second largest export market after the United States.

As the EVFTA will come into effect in 2018, it also brings about optimism that improving government security regarding dispute settlements in areas, such as intellectual property rights, and legal security and transparency will entail a new wave of investments from Europe to Vietnam. The Southeast Asian country is looking forward to dominating the EU market with its agricultural products.

Choosing a location for investment
In addition, intrigued by the prospect of situating hi-tech agriculture at the core of the economy, Vietnam is expected to house 200 hi-tech agricultural businesses and 10 hi-tech agricultural zones by 2020. The general plan of the agricultural zones is to industrialize the agricultural sector by regionalizing agricultural products.

This January, Vietnamese Prime Minister Nguyen Xuan Phuc also re-affirmed that "the answer to agrarian questions in Vietnam’ is hi-tech agriculture" and pressed for an increase in the value of a credit package for hi-tech agriculture from VND 60 trillion to VND100 trillion (US$2.63 billion to US$4.38 billion).

While hi-tech agriculture is at the forefront to industrialize the Vietnamese economy, since 2013 growing public concern over food safety has been paving the way for a field that previously had been unexplored, and is still under-explored today: organic agriculture. Le Thanh, chairman of Organic Life Co, shared that agribusinesses have to build a whole supply chain from production to retail.

Moreover, organic agriculture makes up only 0.2 percent of Vietnam’s agricultural land. However, while the current lack of infrastructures and related services to assist production and distribution of organic products seems a challenge, it also provides ample opportunities for both public and private sectors to construct and upgrade this particular industry.

With a new draft decree in 2015, the Vietnamese Ministry of Agriculture showed expectations for the export value of farming products within the FDI sector to increase from 10 to 15 percent in 2020. It also expects higher FDI inflows will correlate with higher production of quality agri-products. As the Vietnamese economy is getting more liberalized, the Vietnamese agriculture sector is ready to reap the opportunities for development.

source: vietnam-briefing.com

Publication date: 3/20/2017


 


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