A survey conducted by the Vietnam Chamber of Commerce and Industry (VCCI) in 2015 indicated that firms were required to inject capital in farming projects but they had to face multiple risks and profit was not as high as expected.
According to the survey, 26% of respondents said they incurred losses and only 13% broke even. A mere 9% obtained profit targets and more than 50% reported very low profit.
Speaking at a recent seminar on hindrances to the agricultural sector, Dau Anh Tuan, head of VCCI’s Legal Department, warned it was tough to invest in the sector due to huge investment needs but low profit margins and high risks.
Firms must secure long-term capital for agricultural projects but they can take out short-term loans with floating interest rates, Tuan said.
The survey found 80% of agricultural firms had to count on officials to get information they need, higher than the country’s average of 75%. About 68% of businesses in the sector said they had to pay informal fees, three percentage points higher than the nation’s average.
Many companies in the sector have not been well aware of opportunities and challenges arising from Vietnam’s international integration process.
The survey showed nearly 60% of agricultural businesses had little or no knowledge of the Vietnam-EU Free Trade Agreement while over 50% knew little about the FTA between Vietnam and the Eurasian Economic Union.
Many areas in the agricultural sector are still constrained by planning.
Reality showed that as there have not been detailed regulations governing contracts signed between investors and farmers, the latter often sells their farm products to other buyers who offer higher prices than contract partners.
A recent survey of the Institute for Policy and Strategy of Agriculture and Rural Development (IPSARD) revealed many problems investors of agricultural projects have to grapple with. The processes of producing seedlings and breeder animals are complicated and time-consuming.
Regulations on the area used for trial production have sparked concerns and cost firms dearly. It costs VND1-6 billion for the pilot farming of 10-40 tons of hybrid corn and 15-60 tons of hybrid rice.
Firms are encouraged to use machines for farming but supporting policies are unclear and criteria are too stringent.
The survey of IPSARD named land, taxes and fees, capital, infrastructure and services, market access and transparency, goods distribution, access to supporting policies and technology, and labor as the major problems faced by producers of seeds, breeder animals and machines for the agricultural sector. Nearly 69% pointed out capital as the biggest problem they face while 35% bemoaned taxes and fees, infrastructure and services.
“Taxes and fees are pressing issues, and certain fees are high. For instance, a chicken or an egg is subject to various fees and taxes, including import tariffs for animal feed and veterinary medicine, value-added tax, and fees for quarantine checks,” a report of IPSARD said.