Foreign investment in agriculture yet to take root

Vietnamese agricultural sector’s poor performance in wooing foreign investment has proven a headache for management agencies.

The past decade witnessed a sharp decline in foreign direct investment (FDI) i n the country’s agricultural sector with the figure dropping from 8 per cent of Vietnam’s total FDI in 2001 to merely 1 per cent in 2010.

Ministry of Agriculture and Rural Development’s (MARD) International Cooperation Department’s Integration and Investment Division head Tran Van Cong said the shortfall came from three factors.

The first was associated with investment projects’ restructuring when all projects involved with cattle feed production and agricultural-forestry product processing in agriculture were transferred to the industrial sector.

Second, sharp rise in the number of FDI projects in infrastructure and property fields against finite growth of investment projects in agriculture has magnified differences in FDI capital structure.

Third, investment in agriculture was considered risky with lengthy capital return and heavy reliance on climatic conditions.

Objectively, lack of expertise in compiling strategies to woo investors in agriculture, lateness in presenting prioritised investment projects, loosened cooperation between state management agencies and localities in luring investment and resolving FDI projects’ problems were allegedly major causes making foreign investors turn their back to the sector.

A Korea Trade-Investment Promotion Agency (Kotra) representative said Vietnam’s agriculture was less charming in the eyes of foreign investors chiefly due to lack of information, then the problems associated with infrastructure and administrative procedures.

Besides, the incentives to help lure investors into agricultural development failed to create breakthroughs. Though the Vietnamese government enacted the Decree 61/2010/ND-CP encouraging businesses to invest in agriculture and rural areas in 2010, only 1.63 per cent of Vietnamese firms have set their foot in this sector.

“How could we attract foreigners to invest in Vietnamese agriculture when even local firms hesitated to do so and rich rural people inject money into urban area investment ventures,” said head of the Institute of Policy and Strategy for Agricultural and Rural Development Dr. Dang Kim Son.

Son also proposed to offer more incentives towards FDI projects in the agricultural sector.

A MARD senior official said priority would be given to wooing FDI projects using less natural resources, involving the processing industry, seeds production, agricultural machinery manufacture, and technology intensive projects. Besides, MARD said it was considering the application of public-private partnership (PPP) model to help the agricultural sector lure more investors.

Reality shows that current FDI projects in the agricultural sector are mostly small in size, averaging $20-30 million per project and most investors come from Asia such as Thailand, South Korea, Japan or Singapore.

Ministry of Agriculture and Rural Develolpment’s statistics show that the agricultural sector attracted 32 projects worth around $490 million in 2010. These projects chiefly involve livestock breeding, cultivation, forest conservation, water conservation and climate changes – VIR

Tags: invest in Vietnam, Vietnam FDI, Vietnam FDI 2011, Vietnam investment