Investment in agriculture hampered by policy barriers

16:02 | 06/03/2017 Economy

(VEN) - Nguyen Do Anh Tuan, the director of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), talked to Vietnam Economic News’ Nguyen Hanh about attracting investment in agriculture.  

What policy barriers are affecting investment in agriculture?

More than 3,600 businesses conducted investment in agriculture in 2015, representing less than one percent of total firms nationwide. This figure increased to nearly 4,500 businesses in 2016, with 90 percent of them being micro and small-sized enterprises. Businesses are not keen to invest in agriculture due to problems related to land and credit policies. According to the ISPARD, 63 percent and 70 percent of surveyed businesses have faced difficulties in land accumulation and credit access, respectively.

The current investment rate of agricultural businesses in science and technology remains limited. As many as 75 percent of agricultural businesses are using fully depreciated machinery and equipment, while logistics and support services are weak.
Investment from the state budget for agriculture is also limited at around six percent of total social investment capital, while FDI (Foreign Direct Investment) in agriculture only accounts for 1.5 percent of its total capital.

What are the main reasons for business difficulties despite the many incentive land and credit policies?

In particular, tax incentives remain inadequate. For example, coffee exporters are exempted from value-added tax (VAT). However, slow VAT refund has negatively affected the capital flow of businesses. In addition, corporate income tax is not refunded immediately in cash, but is gradually deductible.

Many agricultural businesses are subject to high import duties for greenhouse products, instead of enjoying preferential tax rates as stipulated in the law. For example, the Da Lat Flower Forest Biotechnology Corporation currently imports greenhouse products taxed at 25 percent.

What are your recommendations?

In the process of building mechanisms and policies, the state must create a fair competitive environment for businesses that are willing to invest in agriculture.

Although the state has issued many mechanisms and policies, the focus on investors is not practical. Investment attraction in agriculture is not only the issuing of preferential mechanisms and policies, but also the removal of challenges and difficulties facing businesses.

Nguyen Hanh