Vinamit is widely known for producing 20 different kinds of farm products. Every day, it purchases 300-400 tonnes of dry jackfruit and 100 tonnes of other products to process and export to more than 80 countries. 

 

Difficulties still lie ahead

Apart from its success, Vinamit is facing many difficulties. According to the company’s general director Nguyen Lam Vien, the country’s agricultural sector is now operating on a small scale. So far, the government’s policies have focused on encouraging agricultural activities but not on finding outlets for farm producers who more often than not rely on merchants to sell their products. This is a big problem in the agricultural sector.

 

The company also has to cope with other difficulties such as Value Added Tax (VAT) regulations, which are not in accordance with business conditions in rural areas and the lack of cooperation among farmers. All these factors have combined to hinder enterprises’ efforts to improve both quality and productivity.

 

Few large-scale projects in operation

Although the agricultural sector accounts for nearly 75 percent of the population and 70 percent of the total labour force, it has attracted only 14 percent of the total investment from private enterprises and 3-4 percent of foreign investment.

 

Nguyen Dinh Hung from the Institute of Policy and Strategy for Agricultural and Rural Development (IPSARD) explains: “Foreign businesses getting involved in agriculture and rural development are also facing difficulties. The primary reason is land allocation. It often takes foreign businesses 2-4 years to gain land use rights.”

 

By January 1, 2007 only 30 percent of businesses had been operational in rural areas, and only 12.9 percent of them had invested a total of more than VND10 billion. (Source: General Statistics Office)

According to recent statistics, in the first months of 2008, Vietnam achieved a record high in foreign direct investment (FDI) with US$15 billion. However, there were only 11 small-scale projects in the agro-forestry sector, accounting for merely one tenth of the average capital investment in other projects. Most businesses in the sector are small and medium sized with an average investment of less than US$2 million each.

 

A recent survey in the two northern provinces of Vinh Phuc and Ha Tay, which is now part of the new Hanoi, showed strong development in the sector with the average private business having VND700-800 million capital employing 21-44 workers. Nevertheless, private businesses still suffer a shortage of investment capital, technology, loans and infrastructure. Furthermore, due to their low productivity and poor product quality, these businesses can only provide services with low added value such as collecting, transporting, preliminary processing and packaging products for large-scale businesses.

 

Economists say that to make use of advantages in the agricultural sector, we need to have big businesses with initiatives in operation. For example, on Phu Quoc island, people use the Tomentose rose myrtle, previously thought to be useless, to produce Tomentose wine, which draws special interest from tourists and is sold at a high price.