Agricultural sector looks to boost FDI inflows

Viet Nam looks to amend legal regulations to lure more FDI investors to agricultural sector - Illustration photo

Awaking potentials

Viet Nam was regarded as one of the most open market in the world, said Dr. Vo Tri Thanh, Vice President of Central Institute for Economic Management (CIEM).

The country has potentials in favorable geographic position in a dynamic region, new production center of East Asia, FTA network, “golden population" structure, and political stability.

The country is home to 3,500 enterprises operating in the agro-forestry and fishery sector.

Succeeded enterprises have become a motive force in scientific and high-tech application, market development and have driven local and regional growth.

Overview of FDI in agriculture

According to the Foreign Investment Agency, as of late September, 2014, Viet Nam attracted US$ 11.18 billion of FDI, coming from 1,152 newly-registered projects and 417 existing ones having added capital.

However, the agro-forestry and fishery sector only lured 14 newly-registered projects and had eight operating projects added capital worth US$ 68.45 million in total, equivalent to 0.5% of the total FDI investment.

Most of the sector's projects have small scale with an average value of around US$ 6.6 million.

So far, 30 countries and territories had FDI projects in the area, of which Taiwan took the lead.

The field saw the most engagement of investors coming from Asia with medium development level like Thailand, Taiwan and Indonesia, but not those from highly-developed countries like the US, Japan and the EU.

FDI investors are seemingly not yet interested in the agricultural sector, reasoning the unequal treatment they face in comparison with domestic investors, according to Flavio Corsin, Senior Manager, the Dutch Sustainable Trade Initiative (IDH).

According to lawyer Pham Manh Dung from Rajah & Tann LCT Lawyers Co., the Government has offered infrastructure and manpower development incentives to small and medium-sized firms and farming households, not FDI enterprises. Decree 210 encouraging investment in the industry is a clear example of the bias.

The Government has issued land and tax laws for FDI firms in general and for the agriculture sector in particular, however, support policies and measures for FDI companies in the sector remain absent.

According to Mr. Dung, in recent years, Viet Nam has applied the incentives designed for the industrial sector in agriculture.

Viet Nam has yet to date issued policies on infrastructure development and land resource for FDI enterprises, Mr. Dung added.

The Ministry of Agriculture and Rural Development on July 13 held a meeting to collect comments on the drafting of a new decree in a bid to encourage FDI going into agriculture and rural areas.

The new document also aims to remove unfair treatment between local and foreign enterprises in accessing materials and resources. The Government plans to back large projects and land-related issues for enterprises and households in the sector.

Especially, the draft decree proposes a 10% corporate income tax reduction in 15 years for FDI enterprises operating in poverty-stricken areas, developing hi-tech projects and large-scale paddy fields, a 20% tax reduction for firms investing in agro-aqua-forestry equipment, a tax exemption for four years and a 50% tax reduction for nine years for special projects.

Besides, the drafting committee has suggested the lowest land rent and land use fee or exemptions to the area of projects for building dormitories for workers, vast green and public facilities.

The draft decree is expected to be submitted to the Government in the third quarter of this year.