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Rural VN struggles with funds
Agriculture is lacking FDI as weak human resources and low output deter investors
Agriculture and rural development is losing out on foreign direct investment (FDI) due to weak output, human resources and production sites, a seminar in Hanoi heard last week.
Dr Le The Hoang, an expert from the Institute of Policy and Strategy for Agricultural and Rural Development (under the Ministry of Agriculture and Rural Development), announced his findings, that enterprises working in agriculture and rural development faced difficulty acquiring capital, work sites and technology.
According Dr Hoang's survey, 240 enterprises among handicraft villages in the former Ha Tay Province and Vinh Phuc are competitively weak. Most of them work as business households and are not qualified to handle finance and accounting, making it difficult to participate in the larger commodities market.
Because these enterprises lack production sites, they have difficulty attracting investment, according to the survey.
Vu Quoc Tuan, chairman of the Viet Nam Association for Handicraft Villages, said these enterprises could not access suitable land lots to maintain and expand their production.
"Most land lots in favourable locations have been allocated to projects to build industrial zones. Because land prices are so high, enterprises in handicraft villages (most of them are small and medium) cannot rent land lots," he said.
At the seminar, participants also heard that FDI in agriculture and forestry was still minimal.
FDI capital that comes into the country is mostly for industry and services, with agriculture proving to be unattractive to investors.
According to the Foreign Investment Department under the Ministry of Planning and Investment, in the first seven months of this year FDI was mostly registered for services (with US$22.84 billion), accounting for 51.34 per cent of total registered capital.
FDI capital in industry and construction brought in $21.45 billion, accounting for 48.2 per cent. The remaining 0.5 per cent was for agriculture, forestry and fisheries.
According to the department's leaders, the ratio of 0.5 per cent for agriculture was "small and unstable."
At present, FDI capital is mostly invested in the southern and northern key economic regions, and FDI for remote and isolated provinces remains very small.
Research by the Institute of Policy and Strategy for Agricultural and Rural Development showed that FDI enterprises in agriculture and forestry are mostly small and medium enterprises, with their total capital under $2 million.
Enterprises with an investment of more than $5 million only account for 18 per cent of all enterprises in these sectors.
Pham Dinh Thuy, head of the Industry Department (General Statistics Office) said there were 39,414 enterprises working in agriculture and rural development, accounting for 30 per cent of all enterprises in the country.
The number of enterprises working in agriculture and rural development rapidly increased by an average of 5,255 annually. However, their capital amount was small, only accounting for 15.8 per cent of total enterprise capital.
According to Le Duc Thinh from the institute these enterprises are now running into trouble, having started with limited capital, technology and other conditions of infrastructure. These small local enterprises also find it hard to borrow capital from banks.
At the seminar, participants agreed that more investment incentives were needed for agriculture, and the State should adopt more special incentives to encourage investors to engage in agriculture and rural development.
Pham Gia Tuc, the general secretary of the Viet Nam Chamber of Commerce and Industry, said the Government needed to focus on dealing with capital shortages and working out preferential policies to attract more investors to these sectors.
Meanwhile, the Institute of Policy and Strategy for Agricultural and Rural Development cited complicated licensing and land allocating procedures and tardy project site clearance as the biggest obstacles hindering business operations.
According to delegates, there are still huge investment opportunities in the agriculture and rural sector despite its poor infrastructure.
Many localities boasted fertile and adaptive farmland, with agricultural and industrial crops of high economic value, they said.
Vietnam's abundant workforce, low labour costs, and growing demand for agricultural products, promise to bring big benefits to investors.
However, participants pointed out that the flow of FDI in these areas remained modest, as just $34.3 million was registered for 18 projects, making up 0.77 per cent and 2.75 per cent of the country's total FDI, respectively.
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