Vietnam’s Under Invested Agricultural Sector

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Vietnam’s potential in agriculture has long been undervalued and under-invested. Vietnam has a tropical monsoon climate with rich fertile soil in the northern and southern delta where most crops have three cycles each year. Seventy percent of Vietnam’s population live in the rural areas and most of them are engaged in subsistence farming although the majority are net food sellers.

It should also be noted that Vietnam has gone from a net food importer in the 1980’s to a net food exporter today, with major exports in rice, seafood, aquatic products, flowers, pepper and spices. Fruit is also a growing export commodity, with a huge potential.

While Vietnam, has long been recognized as an agricultural economy and foreign invested projects are being implemented, the amount of foreign investment remains low.

Since the opening of Vietnam’s economy, in 1988, Vietnam has attracted a total foreign investment of US$ 322 billion, however only US$ 3.5 billion has gone into the agriculture, forestry and aquaculture sectors invested in approximately 500 projects.

One of the reasons for the low level of foreign investment, and one of the greatest barriers to entry is the land law and land policies, which are centered around small holdings which create a significant barrier to scalability. According to the Ministry of Agriculture and Rural Development (“MARD”) there will be proposals to the National Assembly and the Government to revise the land laws to remove constraints and create favourable conditions for both domestic and foreign businesses to invest in agriculture in rural areas.

The main foreign investors in Vietnam’s agricultural sector are from Japan, USA and South Korea, and with the recent FTA with South Korea one can expect to see higher levels of investment from Korean companies. However, according to the General Secretary of the Korean Chamber of commerce in Vietnam there are challenges in finding suitable locations, and many challenges concerning collection, storage and transportation. The Japan External Trade Organisation has also forecast that Japanese investment will increase in the sector with a focus on technology transfer, equipment supply, seeds, fresh vegetables and flowers.

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