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NEWS UPDATES Asean Affairs        22  February 2011

Vietnam’s agriculture fails to attract FDI

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In the last 10 years, foreign direct investment (FDI) in the agriculture sector has dropped from 8 percent in 2001 to 1 percent in 2010, leading some to ask what has led to such a steep decline in the country's primary industry.

Tran Van Cong, director of the Division of Global Integration and Investment, an affiliate of the International Co-operation Department (ICD) under the Ministry of Agriculture and Rural Development, cited three reasons for the situation.

First, the transfer of all agricultural and animal feed projects to the industrial sector. Second, the rapid increase of FDI going to infrastructure and real estate projects while agricultural sector investment has remained the same.

And third, investment in agriculture is risky, as production depends so heavily on natural conditions, while the depreciation period is long.

In his opinion, an objective look at the development strategy to attract more FDI for the agricultural sector should be taken, along with creating conditions to facilitate FDI investors to operate in the country. Last year, about 20 South Korean businesses came to Viet Nam to inquire about the country's policies and investment climate in the agriculture sector, particularly in the agro processing industry and agricultural machinery.

But so far, FDI coming from South Korea remains very modest.

A representative from the Korean Investment and Trade Promotion Centre in Viet Nam (Kotra) said openly that it was not lucrative to invest in the agriculture sector, mainly because of the shortage of information, poor infrastructure and cumbersome administrative procedures.

In addition, preferential policies given to investors in agriculture have been given poor ratings by investors. In 2010, the Government issued Decree 61/2010/ND-CP to offer more incentives to investors in agriculture, yet only 1.63 per cent of investors poured money into the industry.

Dr. Dang Kim Son, director general of the Institute of Policy for Agriculture and Rural Development (IPSARD) said: "Even Vietnamese investors do not want to invest in the agriculture industry."

"Rich people in rural areas have invested in urban development elsewhere. So how can we attract foreign investors to invest in our agriculture sector?" Son asked.

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