Meeting on policies for attracting FDI to agriculture hears of myriad issues dissuading investors.
Despite bringing in export turnover of about $30 billion each year, foreign direct investment (FDI) in the agriculture, forestry and fisheries sector remains too low, the Deputy Minister of Agriculture and Rural Development Le Quoc Doanh told a consultative meeting on July 13 regarding policies to encourage FDI into the sector.
He said that on average over the last five years FDI in agriculture has only accounted for 0.5 per cent to 1 per cent of the total FDI in the whole country. Despite much effort being made by the State to attract investment, registered FDI capital in the agriculture sector since the beginning of the year accounts for just 1.4 per cent of the total, with an average of $7 million per project.
This is absurd given that agriculture is a strength of Vietnam, Deputy Minister Doanh said. “FDI in agriculture still mainly comes from countries where the level of technology level is not so high, such as Taiwan and Thailand, while the presence of leading countries such as the US and Japan remains negligible,” he added.
Questions were asked at the meeting as to why foreign investors are indifferent to the country’s agricultural sector.
For many experts, the main reason is that the scale of agricultural production in Vietnam is too small, infrastructure and related services are inadequate, and quality and labor productivity are low. The agricultural sector is also yet to adopt long-term strategies to attract FDI while the legal framework and policies aimed at foreign investors in agriculture lack transparency.
According to Mr. Pham Manh Dung, a lawyer at Rajah & TannLCT Lawyers, who consulted the Ministry of Agriculture and Rural Development (MARD) on compiling a decree to attract FDI into agriculture, said that the government is still to introduce policies on developing infrastructure for agricultural projects and the Law on Investment only has policies for supporting infrastructure at industrial zones. There is also an absence of government policies on developing human resources for FDI projects.
Therefore, he said, in the decree for agriculture that is being drafted, tax incentives for FDI enterprises in agriculture are to be increased, including exemptions for as long as the first four years and a 50 per cent reduction for the next nine years.
Regarding infrastructure and training human resources, he said the State is to support 70 per cent of the human resources training costs incurred by agricultural FDI projects in Vietnam and they will also receive support in terms of infrastructure, as domestic firms do already.
Many investors spoke at the meeting of their difficulties when investing in Vietnam’s agricultural sector, particularly regarding tax issues. A representative from the Japan International Cooperation Agency (JICA) said that Japanese enterprises investing in Vietnam must regularly invest in new technology but import taxes are quite high. This is a barrier for FDI companies when deciding to invest in Vietnam’s agriculture sector, he said, and he recommended that the State adopt a special mechanism on the issue.
Many other representatives in attendance said that a more favorable investment environment is needed. Support from ministries and local authorities is required for foreign investors to invest in projects.