JICA conference told of issues that continue to plague investment activities in Vietnam's agriculture sector.
Vietnam is an ideal destination for Japanese investors in agriculture but there are still a host of barriers relating to land, financial support, and administrative procedures that have made it difficult for investors over recent years.
This was the general assessment of many agriculture experts from Japan attending the “Towards Sustainable Agri-Finance in Vietnam - From the Case of Lam Dong province” conference held by the Japan International Cooperation Agency (JICA) and the Vietnam Academy of Social Sciences (VASS) in Hanoi on March 18.
A representative from the Dream Incubator Vietnam JSC, which specializes in strategic consulting for Japanese investors in agriculture in Vietnam, said that in 2014 there were some 34 Japanese enterprises seeking investment opportunities in the sector and the number rose to 100 in 2015. “This shows that Vietnam has the potential to attract investment in the agriculture sector,” he told the gathering.
Vietnam has great potential to grow and attract investment in agriculture but production efficiency remains low. I have seen Malaysian vegetable growers exporting vegetables to Singapore with revenue ten times higher compared to growers in Lam Dong province. The Vietnamese Government should encourage agricultural startups, open schools to train farmers in agribusiness, and provide support mechanisms for potential businesses in agriculture.
Mr. Mori Mutsuya, Chief Representative of JICA Vietnam
Issues relating to land, financial support, and administrative procedures remain the greatest barriers for agriculture investors in Vietnam to overcome. Mr. Mori Mutsuya, Chief Representative of JICA Vietnam, said there is a Japanese investor investing in onions in Lam Dong province to export to Japan and other provinces such as Binh Duong and Ho Chi Minh City as well as to supply the AEON supermarket chain. The investor can afford to invest in modern machinery and equipment for large-scale production but cannot secure a large enough land plot for large-scale production.
Experts at the conference also pointed out the important role of agri-finance, which is considered a key for agriculture development and is in line with current policies of the government encouraging private sector investments in agriculture restructuring and rural development.
Deputy Governor of the State Bank of Vietnam (SBV) Nguyen Dong Tien said that rural agriculture is one of five priority areas of the banking sector. Government and SBV credit policies for the sector are increasingly suitable to the aspirations and needs of the people.
In order to ensure the final goal of “Enhancing the whole value chain of agricultural produce”, JICA proposes a comprehensive support framework that addresses current bottlenecks in agricultural promotion, such as non-preferential loan terms, strict collateral requirements, poor business planning, and/or huge upfront investment burdens.
The JICA agriculture finance promotion program will be piloted in the central highlands’ Lam Dong province and if successful will be widely adopted in other provinces. Under its support framework, in addition to concessional funding in ODA loans, JICA will also provide technical assistance to enhance banks’ capacity for loan appraisal and the proactive monitoring of business assets. For farmers and agricultural enterprises, technical assistance to strengthen their capacity for business planning in a financially feasible manner will be provided to improve access to bank loans with higher concessions and relaxed security requirements. Additional policy measures such as credit guarantees and alliance with installment credit providers are also expected to lower collateral requirements and ease the upfront investment burden.