(VEN) – Agriculture is regarded as a potential rescuer for the economy, however, it has proved very difficult for the sector to attract foreign direct investment flows. What is needed to be done to attract this source of capital to agriculture is a question of great interest.
Hard for agriculture to attract foreign investment
Until May 20, 3013, Vietnam had attracted 14,918 Foreign Direct Investment (FDI) projects with a total registered capital of US$216.928 billion, including the disbursement capital of US$75.7 billion. Of those, only 496 projects were in agro-forestry and fishery sector (accounting for 3.3 percent of total FDI projects invested in Vietnam over the past 25 years), with a total registered capital of US$3.266 billion (accounting for 1.50 percent) and the disbursement capital in this sector was US$1.708 billion (2.2 percent).
In the first five months of this year, there has only been four new projects in the agro-forestry and fishery sector, worth US$10.71 million out of 398 new FDI projects with total registered and added capital of US$8.17 billion. Notably, while FDI flows in industrial and processing sectors have seen stable growth during the period, those FDI flows in agriculture witnessed a decline of US$3.50 million. As a result, total FDI capital in agriculture only reached US$7.21 million, accounting just 0.125 percent of total FDI flows in Vietnam. This is obviously a too modest amount compared with the potentials of Vietnam’s agriculture sector.
Minister of Planning and Investment Bui Quang Vinh once said not only FDI businesses hesitate to undertake investment in agriculture but domestic enterprises also don’t feel very enthusiastic in investing in the sector.
Strong commitments needed
Talking about the reasons that make Vietnam’s agriculture sector unattractive to investors, Director of the Development Strategy Institute, Ministry of Planning and Investment Bui Tat Thang said agriculture is a risky sector which usually suffers from natural disasters and epidemics plus price fluctuation. Therefore, although it is a sector of many potentials, it is still not very attractive to investors.
Economic expert Pham Chi Lan also said Vietnam’s unattractive agriculture sector was due to its unfavorable infrastructure for agricultural development. Farming in Vietnam still follows traditional ways and in small scales. In addition, policies to stimulate investment in the sector are not so appropriate, for example an item in the Land Law only allows farmers to use land within 20 years, which is a too short period.
Social investment in agriculture is also very low. The National Assembly has recently increased social investment in agriculture to 10 percent of total society investment. Expert Pham Chi Lan stressed this was a higher proportion compared with previous periods, however, it remained very low as over 50 percent of the Vietnam’s workforce is in the agriculture sector.
She also said to attract more investment in agriculture sector, the Vietnamese Government needs to make fundamental changes, for example changes about land policies. If Vietnam continues to maintain small scale agricultural production, it will be difficult to attract investment capital as small scale models only match individual and household production methods, which can hardly produce good products with equal quality.
The government recently also planned investment attraction in agriculture in the form of Private Public Partnership (PPP), which is seen as a way to draw participation of domestic and foreign private enterprises in the sector. However, to help PPP projects obtain positive results, there should be involvement and strong commitments from the State agencies in terms of technology investment in agriculture, otherwise it will be difficult to attract investment capital in the sector./.
By Chu Huynh