Last week’s insights made brief mention about the need for the reform of the Agricultural sector and in the press these last few days there have been several articles on the sector, so I thought it was worth revisiting.
By way of background it should be remembered that in the last 30 years, Vietnam has gone from being a net food importer to a net food exporter and from a situation 30-35 years ago where families did not have enough food on the table and people much younger than myself remember those times quite vividly. Today Vietnam is one of the world’s leading exporters of rice, Coffee, pepper, and aqualture products.
Approximately 24 million workers (45% of the country’s labour force) are engaged in agricultural production but the sector only accounts for 17% of the national GDP and this figure is on the decline.[1]
Only 1% of registered businesses in Vietnam are registered in the Agricultural sector as most farming is done by families as small holders not as businesses reflecting more subsistence farming.
The Government is making a big push for agricultural reform but the gap between the vision for high tech farming and the current reality is really quite large.
As a first step the Government has introduced a new draft decree on incentives for agricultural and rural investments and is looking for feedback from experts in the field. The draft decree proposes that enterprises with high tech projects will be eligible for Government support in terms of infrastructure and utilities. If an enterprise invests into building a plant to process agro-forestry-aqua products the Government will support with up to 60% of the total investment capital up to a max. of VND 7 billion (US$ 318,000). Other incentives are also available for investments to manufacture agricultural equipment or production of biological products.[2]
Whilst the incentives are available to foreign firms these are relatively small and seem to be focused more to domestic farmers. Whilst these changes and reforms are to be welcomed the biggest challenge in a move to high te3ch farming, in my opinion, is the lack of availability of large land lots for farming and the restriction on farmers renting land to foreign investors even for the purpose of farming.
[1] Vu Tri Thanh – senior economist Centre for Economic Management (CIEM).
[2] Vietnam Investment review July 31st 2017.
