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Attracting foreign direct investment in agriculture
Nguyen Thi Bich Van, the vice director of the Foreign Investment Agency of the Ministry of Planning and Investment stated that this year the ministry will focus on attracting foreign direct investment in agriculture. Why the sudden push in this direction? And just how much FDI is the vice director talking about?
FDI for agriculture is falling
FDI capital is falling off in every field due to the global financial crisis. This is unavoidable. But when FDI going into agriculture drops off, something needs to be done. Investment capital in agriculture helps modernize agriculture, it creates job opportunities and it increases the income levels of millions of labors.
At the same time it helps eradicate hunger and alleviate poverty, it enables more Vietnamese agricultural products to penetrate international markets and it improves rural infrastructure.
But actually, according to the Ministry of Agriculture and Rural Development's report, FDI capital in agriculture has been decreasing for quite some time. From 1988-1990, 21.6 percent of FDI went into agriculture. This fell to 8.3 percent from 1991-1995 and it was only six percent in the year 2008. In the first two months of 2009, US$4.7 billion in capital was registered for 976 agricultural FDI projects but only about US$2 billion were disbursed. There's also the matter of where foreign investment in agriculture takes place.
It is the case that 70 percent of FDI capital in agriculture is invested in southern Vietnam. Investors are not finding the Red River Delta in northern Vietnam to be of much interest. But, even Binh Duong, a region in southern Vietnam that leads in capital attraction and number of projects in agriculture, attracted about US$1.1 billion in the first two months of this year.
FDI going into cultivation and agricultural product processing made up 37 percent of committed capital and 51 percent of materialized capital while afforestation and forest product processing made up 35 percent of registered capital and 17 percent of materialized capital.
The areas of livestock rearing and animal feed got only 21 percent of registered capital and 23 percent materialized capital, this in spite of the fact that they are promoted as 'a strength of Vietnamese agriculture'. The size of any investments that have been made in science and high technology have been small, especially in the more remote and poor areas.
Nguyen Xuan Trung, the vice director of the Foreign Investment Agency of the Ministry of Industry and Trade, stated, "In 2009, at least while the global financial crisis is showing no signs of recovery, all foreign investment coming in Vietnam will be reduced, and this will be especially so in agriculture." Many people are now looking for a way to attract more investment capital into Vietnam's agriculture.
More FDI capital in agriculture?
Over the years, there has been much talk about investing and developing agriculture and rural areas making use of various guidelines and policies. However, the interest has been in obtaining capital for specific pet projects while overall strategies have not been formulated and the effectiveness of individual projects has not been ascertained. There continues to be so confusion regarding the overall direction of agricultural investment, land policies remain vague and land clearance for the development of agribusiness is a problem that will not go away.
In addition, policies that are formulated using criteria of a time which is past to attract investment now and in the near future will result in little production and a weakening of the links which should be binding farmers, scientists and businessmen. This is not to mention the rather primitive skills of those working in agriculture, farmers' ignorance of business management and their inability to make use of modern equipment. Investors in agricultural projects realize that they must pay to train people and bring in personnel who can use modern equipment and teach local people how to use it. A recent statistic revealed that there are now 46.7 million agricultural laborers, which is 74.6 percent of the nation's workforce.
Eighty-three percent of these agricultural laborers have had no sort of training whatsoever. It is said that few investors are willing to enter into agriculture, forestry and pisciculture because they feel that the risk of failure is too high and the potential profits are to low. Farmers - those working in investment projects - think only about short-term profit, while those with FDI capital are interested in long-term investment and profits that will continue to flow in.
To soon improve the situation, departments and ministries are looking for a new way to present FDI investment opportunities in agriculture. Nguyen Thi Bich Van said that in 2009, we will focus on attracting FDI capital in agriculture, including high technology and development centers that might, for example, create new plant varieties. Agricultural processing is needed, but processors want to have an insured supply of raw materials. Processors that do get established would likely build cold storage facilities and factories that would process export products.
The Ministry of Agriculture and Rural Development says that it is now in the process of coming up with a mechanism and programs that will attract FDI to agriculture and rural areas in the period 2009-2015. Businesses to be targeted are those involved in biotechnology, animal breeding, processing technology and after-harvest protection, all of which need to be improved to satisfy demanding importers.
The Ministry is preparing to send a government task force to Russia, Japan and China to see if investors in these countries can be enticed to invest in Vietnamese agriculture. Hopefully, the attempts by the various officials will be carried out in earnest and acted on soon so that Vietnamese agriculture can be improved with a capital infusion and rural infrastructure and the lives of Vietnamese farmers will be improved at the same time.
VietNamNet, Ven
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