Grant Thornton Vietnam, Chairman’s Insights
August 7, 2017
Last week’s insights made brief mention about the need for the reform of the Agricultural sector in Vietnam. In the press these last few days, there have been several articles on the sector, so I thought it was worth revisiting.
By way of background it should be remembered that in the last 30 years, Vietnam has gone from being a net food importer to a net food exporter, and from a situation 30-35 years ago where families did not have enough food on the table. People much younger than myself remember those times quite vividly. Today Vietnam is one of the world’s leading exporters of rice, coffee, pepper, and aquaculture products.
Approximately 24 million workers (45% of the country’s labour force) are engaged in agricultural production but the sector only accounts for 17% of the national GDP, and this figure is on the decline.
Only 1% of registered businesses in Vietnam are registered in the Agricultural sector as most farming is done by families as small holders, not as businesses reflecting more substantive farming.
The Government is making a big push for agricultural reform but the gap between the vision for high-tech farming and the current reality of the farming sector is quite large.
As a first step, the Government has introduced a new draft decree on incentives for agricultural and rural investments by looking for feedback from experts in the field. The draft decree proposes that enterprises with high-tech projects will be eligible for Government support in terms of infrastructure and utilities. If an enterprise invests into building a plant to process agro-forestry-aqua products the Government will offer support, with up to 60% of the total investment capital up to a maximum of VND 7 billion (US$ 318,000).
Other incentives are also available for investments to manufacture agricultural equipment and for production of biological products.
While the incentives are available to foreign firms, these are relatively small and seem to be focused more to domestic farmers. These changes and reforms are to be welcomed.
The biggest challenge in a move to high-tech farming, in my opinion, is the lack of availability of large land lots for farming, and the restriction on farmers renting land to foreign investors specifically for the purpose of farming.
Kenneth M Atkinson
Executive Chairman of Grant Thornton Vietnam