Investment in agriculture - Needed: State incentives

Vietnam has many advantages for agricultural development

Real stories

JETRO Chief Representative in Hanoi Atsusuke Kawada said Japanese businesses investing in the Vietnamese agricultural sector currently distribute their products mostly in Hanoi and Ho Chi Minh City. They have yet to expand their distribution networks into other localities nationwide or export to foreign markets due to poor transport infrastructure and a lack of agricultural product preservation equipment in Vietnam.

Dr. Dang Kim Son, former Director of the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), said, “I had joined a Japanese business delegation in a field trip to the Mekong Delta. They said they had been to many places around the world but found no other country having a nice agricultural region like the Mekong Delta in Vietnam. But when I asked them whether they wanted to invest in the delta, their answer was ‘No’.”

Why? They explained that although the Mekong Delta offers great potential for agricultural development, the region has almost no railway or highway, while flight routes are used just to transport passengers.

Not only the Mekong Delta but many other regions in Vietnam, such as the Central Highlands, have faced numerous difficulties in attracting investment into agriculture despite great advantages for agricultural development. One of the reasons is inadequate infrastructure.

At a recent meeting between the Ministry of Agriculture and Rural Development and businesses, Geleximco Group Chairman Vu Van Tien said that five years ago the group invested nearly VND10 trillion in the An Hoa Paper Plant in Tuyen Quang Province. Before it made this investment decision, the group was promised to be provided with 165,000ha of forest land in Tuyen Quang Province according to a governmental plan, while it was in need of just 30,000ha. In fact, however, Geleximco received a mere 500ha and most of this area has been occupied by local residents. So its paper plant has fallen into a difficult situation due to material shortages.

The state needs to anticipate

In the opinion of economist Pham Chi Lan, to develop an agriculture-based economy, more efforts are required to attract investment, as well as to commercialize and modernize this sector. Agricultural production needs to be based on market demand while reducing direct involvement of the state in business activities.

Dr. Dang Kim Son proposed three solutions to deal with difficulties that face business access to land for agricultural production. Firstly, the government should create favorable conditions for agricultural land use transfer so that it is used effectively for agricultural production. Main conditions include simple administrative procedures which allow reducing time and cost, and increases in land quotas enough to establish large fields. Secondly, people who want to hire land should be allowed to sign contracts with land owners who want to shift to other business - this also requires the simplification of administrative procedures. Thirdly, favorable conditions should be created for farmers to contribute land to joint ventures with businesses or cooperatives so that they can share pidends and profits.

IPSARD Director, Dr. Nguyen Do Anh Tuan, said the state needs to put in place a policy that offers land-related preferences to businesses investing in the construction of infrastructure for agricultural processing and those manufacturing products catering for agricultural production. An appropriate mechanism needs to be put in place to reimburse businesses for the amount of capital they invest in the construction of infrastructure outside their project sites. The reimbursement can be deducted from land rentals, infrastructure rentals, or taxable business incomes.

According to Dr. Dang Kim Son, the state plays a very important role in attracting investment into agriculture. In his opinion, the state needs to increase public investment in this sector rather than proposing policies on paper. Special attention needs to be paid to the provision of input materials and machinery for agricultural processing as well as investment in transport and irrigation.

Investing in agricultural infrastructure and machinery and building global supply chains are significant measures to attract investor attraction to Vietnamese agriculture, Atsusuke Kawada said.

Nguyen Hanh