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Rural areas lack funding
Rural areas and the agriculture sector have provided the main impetus for the nation's rapid growth in the post doi moi (Renewal) period, but the sector has not received sufficient investment or help from the Government, experts say.
Viet Nam's rural areas are still thirsty for funds to develop production and trading activities because capital injection from the Government has been relatively modest, a Thoi Bao Kinh Te Sai Gon (Sai Gon Economic Times) report cites several experts as saying.
Between 2003 and 2007, the State's investment in agriculture met just 17 per cent of the sector's demand. The Ministry of Agriculture and Rural Development has, in fact, reported that investment in rural areas and agricultural production has decreased in recent years.
In spite of accounting for 20.91 per cent of the GDP (Gross Domestic Product) in 2009, total capital invested in the agricultural sector accounted for just 6.26 per cent of total State budget revenue, 0.19 per cent lower than 2008.
The percentage is considered to be much lower than in regional countries including South Korea, Malaysia and the Philippines where agricultural investment often accounts for more than 20 per cent of their total State budget revenue.
Dr. Nguyen Thi Kim Thanh, Director of the Banking Strategy Institute, said the source of capital injected into rural enterprises and individuals were bank branches operating in localities, the Viet Nam Bank for Social Policy, credit funds, small scale financial institutions, programmes and projects funded by the Government and non-governmental organisations.
Between 2005 and 2009, the capital that the Government pumped into projects in rural areas increased by an average of 12 per cent per year. However, in 2009, this accounted for just 1.04 per cent of the GDP, according to Pham Huy Hung, Chairman of the Viet Nam Bank for Industry and Trade.
Dr. Nguyen Minh Phong of the Ha Noi-based Institute for Socio-economic Development also revealed that the Government's investment into capital construction in rural areas was too small at just VND9.91 trillion (US$200 million) in 2009.
The country should have invested much more in the agricultural sector since the World Trade Organisation (WTO) allows agricultural subsidies to account for 10 per cent of the agricultural sector's GDP (Equivalent to US$1.2 billion) in addition to VND4 trillion ($200 million) from the State budget, Phong said.
The agricultural sector was not an attractive investment area for both domestic and foreign enterprises because of inherent risks such as crop failures caused by bad weather, pests and diseases, Thanh said.
Poor infrastructure in rural areas has limited their capacity to attract capital sources including foreign direct investment. FDI projects in agriculture now represent just 0.59 per cent of the value of the country's total.
Credit organisations also exercised undue caution in rural areas, said Nguyen Huu Nghia, director of the Department of Monetary Forecasting and Statistics under the State Bank of Viet Nam.
The banks' loans to the agricultural sector in 2009 accounted for just 15.55 per cent of the total, Nghia said.
Explaining the situation, Thanh said most banks preferred to lend to high and stable income earners who wanted big loans rather than to poor people. The latter usually needed small loans and faced high risks, which pushed up the banks'costs.
Phong of the Institute for Socio-economics Development said that Viet Nam's policies were not attractive enough to divert capital sources from society into agriculture and rural areas.
He suggested the Government strengthen credit activities in rural areas.
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