Minister of Planning and Investment Nguyen Chi Dung told the National Assembly (NA) last week that his ministry (MPI) will officially submit a draft amendment to Decree No.57/2018/ND-CP on encouraging enterprises to invest in the agricultural and rural sector next month.

Decree 57 was enacted in 2018 after a five-year process. It covers many types of incentives regarding rental of land and water surface, land concentration, transfer and application of high technology, human resources training and market expansion, and investing in manufacturing agricultural machinery and equipment.

“A law on attracting agricultural investment and rural development has yet to be considered, but Decree 57 is being amended in a manner that there will be more beneficiaries, with policies being more attractive and resources easier to mobilise for implementation,” Minister Dung said.

It is expected that the new legal framework will be sufficiently attractive enough for businesses to cultivate their high-tech agricultural projects, and import high technologies into the country.

Vietnam’s agricultural sector last year grew 2.85 per cent on-year, with total export revenue of $48.6 billion, up from $41.2 billion in 2020. The figure is expected to reach more than $50 billion this year, according to the Ministry of Agriculture and Rural Development (MARD), which commits to cutting hundreds more administrative procedures for businesses and investors.

Plans accelerated to boost investment in agriculture-illustration photo

Wooing more funding

How to lure more investment into agriculture was a heated topic at last week’s Q&A session with the NA. Deputies like Huynh Thanh Phuong, representing the south-eastern province of Tay Ninh, grilled Minister of Agriculture and Rural Development Le Minh Hoan and Minister Dung, as they are responsible for policies in this area.

“Enterprises are considered a backbone for developing large-scale agriculture based on a commodity-based development orientation with the application of science and technology for exports,” Phuong said. “However, the attraction of investment in agriculture over many years has faced lots of difficulties due to climate change, natural disasters, and epidemics. This has discouraged investors and businesses from pouring money in.”

He also pointed out that there have been many bottlenecks impeding enterprises and investors, such as difficult access to land and markets as well as cumbersome administrative procedures. “With your responsibility, what solutions and actions will be enacted and taken to radically change the situation, in which there will be more space for the agricultural sector to flourish?,” Phuong asked Minister Hoan.

Deputy Nguyen Ngoc Son, representing the northern province of Hai Duong, also said that Vietnam is surging to become a potential land for developing high-tech agriculture closely linked with eco-tourism, to which many investors are paying attention.

“Nevertheless, a series of obstructions remain involving access to land and capital, difficulties in high-quality human resources, and especially a lack of zones specialised in high-tech agricultural development,” Son said.

And deputy Duong Khac Mai, representing the Central Highlands province of Dak Nong, also underlined the need for more effective mechanisms and policies to lure investment into agriculture.

“What can the government do to turn Vietnam’s agriculture into an attractive investment magnet for investors?,” Mai asked.

Minister Hoan said that during the process of drafting the amendments to Decree 57, the MARD will “work with high-tech agricultural enterprises in order to find out more difficulties facing them, so that feasible solutions can be applied to the new policy in favour of businesses and investors. We hope the new policy will help the country attract more agricultural investment.”

The government aims to see an average annual 6-8 per cent rise in agro-forestry-fishery exports by 2030, when there will be 80,000-100,000 effectively operating agricultural enterprises, including 3,000-4,000 large-scale ones and 6,000-8,000 medium-sized ones.

Rising difficulties

Figures from the MPI showed that in the first five months of 2022, Vietnam attracted only six agro-forestry-fishery projects registered at only $19 million, in addition to $12 million as additional capital from operational projects.

As of May 20, the country had 523 agro-forestry-fishery projects registered at $3.84 billion, accounting for merely 1.49 per cent of total foreign-invested projects in Vietnam, and 0.9 per cent of total foreign direct investment.

“One of the key reasons is that the mechanism for wooing investment into the sector is not really attractive. Over past years, enterprises have been focusing their investment in production and processing, but difficulties remain,” said Minister Hoan.

He cited a recent meeting with an investor wishing to fund agricultural processing in Vietnam. “One of their biggest concerns is that the material quality is unstable and seasonal,” Hoan explained. “For example, if they open a factory in Bac Giang, but the northern province has only lichi, which fruits within merely two months, what will the factory do during the other 10 months of the year? Thus a lack of materials is also a big impediment to investment.”

Having exported agricultural machinery and equipment into Vietnam for a few years, Amnon Peret, director of Israel’s Duran Farm Industries, is expecting more favourable policies in Vietnam so that he can consider establishing a factory in the country to manufacture these products, which can be consumed right in the country.

The company is also expected to establish a joint venture with a Vietnamese partner to plant and process coffee in the Central Highlands region.

“We keep our close eye on Vietnam’s agricultural policies. Lately we learned that Vietnam is showing its strong will to pare down conditions for agricultural projects. That’s a good signal,” Peret told VIR. “Currently, legal changes are not keeping up with the market. Specifically, discrepancies in implementation of policies and coordination among some state bodies are confusing for businesses. Some regulations have a rushed execution roadmap that makes it hard for some companies to adapt their operations to the changes. “However, we will wait more for a better business climate before officially realising our plans in Vietnam.”

In another case, Dinh Hai Lam, director of a cocoa plantation and processing group in the Central Highlands province of Dak Lak, said that he welcomes any new feasible policy to help companies like his remove numerous obstructions.

“Currently, to obtain a licence for land to plant one hectare of cocoa, it often takes several years, with hundreds of signatures,” Lam said. “Though the government has the policy to support high-tech agricultural firms, there is no clear definition of ‘high-tech agricultural firm’, making it hard for firms like us to enjoy incentives. Moreover, numerous complicated procedures remain. We hope more procedures are cut as soon as possible.”

Le Van Thanh, Deputy Prime Minister In the first five months of 2022, all economic sectors have witnessed quite high growth on-year, of which the most prominent is agricultural exports, which reached $23.2 billion, up 16.8 per cent. The key agricultural exports have continued to maintain their positions and brands in the international market, such as pepper (first ranked in the world, up 25.7 per cent); coffee (second, up 54 per cent), rice up 10.3 per cent; seafood up 46.3 per cent, wood products up nearly 7 per cent, and more. These are very encouraging results. In order to further develop the agricultural sector, firstly, the government will direct the renovation of the organisation of production and business in agriculture, from investment in research, selection and breeding to the planning and construction of standard raw material areas, and forming large-scale agricultural production areas. It is also needed to promote the application of science and technology to produce clean and high-quality agricultural products to meet domestic and international consumption demand. Secondly, the government will direct the expansion of trade promotion and negotiate conditions on technical barriers and trade barriers so that agricultural products that have no market can soon be officially exported to major markets such as Europe, the US, and China. This will contribute to gradually reducing small-scale exports across the northern border while limiting the congestion of goods taking place at border gates. Next, there will be a stronger mechanism to support credit, exempt and reduce fees and taxes in order to attract businesses into investing in the production of agricultural materials and fertilisers. The government will also direct the review and assessment of the overall demand for raw materials for animal feed processing, from which we can make plans and build production areas to serve the feed industry and gradually ensure our own supplies. Finally, the government will focus on proposing amendments and supplements to the Law on Land; formulating mechanisms and policies to promote land resources; forming and developing a market for land use rights in agriculture; and creating conditions to support farmers in exploiting and effectively using land.