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Local firms buy into agriculture

Update: April, 09/2015 - 09:03

The fact that some major Vietnamese groups are announcing their plans to enter the agricultural sector is positive news for the country's economy.

However, the local firms have been facing several difficulties while investing in agriculture. Dang Kim Son, director of the Strategic Institute of Agriculture and Rural Development, shared his views with Vietnamese firms and local media at a recent meeting.

Dang Kim Son

Some large local business groups recently announced their investments in agriculture. What do you think about this development?

First of all, the economy in Viet Nam and the world is recovering after a long period of recession.Secondly, a large number of local and global companies consider investing in agriculture a promising trend, because they think that it is a sustainable and healthy path.

In Viet Nam, the process of economic restructuring is going on with capital being transferred from invisible economic sectors such as property and finance to visible sectors such as agriculture.This is a really a good sign.

Why is the agricultural sector attracting local investors now?

High- priced agricultural products and sustainable development are what they see in the promising sector. It draws stagnant capital into the economy after recession. Several major names in the private economy turned to agriculture, a sector that used to be considered a field of high risks but low benefits.

In fact, several groups have been very active since they invested in agriculture and earned good revenue years ago, such as TH True Milk, An Giang Plant Protection Joint Stock Company, Thai Binh Plant Seeds Company and Binh Dien Fertiliser Company. However, it has become more of a trend recently.

Last year, the agricultural export turnover reached US$31 billion.

Viet Nam is in the process of finalising bilateral and multilateral negotiations on several free-trade agreements. I think the local firms may react a little bit late and on a smaller scale, but they are developing attitudes like global entrepreneurs.

However, local firms have so far invested only in preferential sectors with high and quick benefits, such as breeding and farming, while other sectors such as seafood or forestry have not attracted much capital. Why?

Agriculture is still a new sector for local businesses. That's why they must be very careful while investing in it. Coffee and rice are the two products that a lot of local businesses invested in, but many of them had to leave the field as there were a number of disadvantages, especially in policy management.

Other difficult sectors such as forestry, with several obstacles in policy and infrastructure, only found investors in processing, but not in the planting sector.

I think local firms will not reject it if they see a healthy market for them to bring their advantages into play.

The most important factor while investing in agriculture is land. But many projects face difficulties in getting land. Why?

The difference between investing in industry and agriculture is the land fund. Agricultural projects need a large land fund, excluding transport infrastructure. However, the land-use policy in Viet Nam has several controversial issues such as land use rights, compensation work and procedures to transfer land-use objectives.

The policy hasn't created a transparent playing field for the investors. At the moment, if a firm wants to own land, it has to negotiate with each farmer to buy the land-use right. When they have red books in their hands, they have to work with provincial authorities to lease that area.

I think these things make it very difficult for firms to do their business. Thus, the land policy needs to be revised to help businesses invest in agriculture.

n How do farmers benefit from investment by firms?

Farmers cannot themselves find the path to enter the market, but the business firms can help them to connect with the market to know its demands and prices. The farmers need a large source of capital to purchase machinery to change production structures. The farmers need to apply science and technology to raise productivity.

Thus, the three factors of capital, science and technology and market are what the farmers gain through business investment.

n The number of business groups investing in agriculture is still modest. How can more investment be lured into the sector, in your opinion?

This is an issue of not only the agricultural sector, but the whole economy. Business firms want to invest in the field that brings them the most benefits with the least risks.

In my opinion, the gap between infrastructure facilities should not be too wide between regions. Next, the land-use policy should be improved.

Many companies complain that they face difficulties in accessing bank loans, paying import/export tariffs or undergoing quarantine procedures, even though they applied technology to export their products to several countries.

I think Vietnamese firms have legitimate aspirations when investing in the agricultural sector, but more needs to be done to help utilise their best potentials and strengths. — VNS

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