Agriculture capitalising from private investment

Private investment is helping farmers and other agricultural groups to become more entrepreneurial

Hundreds of local people in Nong Cong district of the north central province of Thanh Hoa are these days busy with completing infrastructure for a hi-tech application initiative in dairy farming and processing for TH Group.

With VND3.8 trillion ($165 million) and a herd of 20,000 cows, the project inherits achievements of the $1.2 billion hi-tech dairy farm that TH Group has carried out over the last 10 years in Nghe An in creating high quality fresh milk.

Besides this project, the group has also been constructing the first stage of its hi-tech dairy farm in the mountainous Son Hoa district of Phu Yen province, with a capital of VND 1.15 trillion ($50 million).

With its projects, TH Group aims to expand the herd of dairy cows to 400,000, thus contributing to Vietnam’s goal of 500,000 cows under the government’s master plan for agricultural production development to 2020 and vision to 2030.

Another local enterprise that has also strongly invested in agriculture over recent months is Nafoods Group. After putting in operation the two-hectare facility valued at $9 million in northern Son La province, this enterprise has processed 120 tonnes of products per day.

At the end of June 2019, Nafoods signed a co-operative agreement with the International Finance Corporation (IFC), a member of the World Bank Group. Accordingly, Nafoods will get support of $8 million from the IFC to expand production fields and scale. The company also plans to widen its processing factory in the Mekong Delta province of Long An, and build a facility in the Central Highlands region to pack fresh fruit. With Nafoods’ expansion, there will be 11,500 more farmers to join the supply chain and 150 more full-time jobs in their factories.

Nguyen Manh Hung, chairman and general director of Nafoods Group said, “We are trying to improve the value of our products by applying safe and sustainable agricultural practices and improving production facilities. We believe that improving production capacity will also allow us to create more opportunities to increase income for local farmers and meet the requirements of high-value export markets.”

In another case, in the first six months of 2019, Vietnam’s agricultural sector also saw the added investment of VND1 trillion ($43.4 million) via a brand-new name from Mobile World Investment Corporation. Accordingly, with the investment, this enterprise will increase its number of food stores, called Green Grocery Store, to 700 by the end of this year.

Working in the field of aquatic feeding, Viet-Uc Seafood Corporation has also invested VND200 billion ($8.7 million) in a hi-tech catfish seedling farm project in Tan Chau town in the southern province of An Giang.

Foreign companies involved

Along with local private enterprises, many foreign firms have also been entering the Vietnamese agricultural sector.

Two weeks ago, in the Mekong Delta province of Ben Tre, Huy Thuan Aquatic Investment Co., Ltd. signed an agreement on strategic co-operation with Dutch-based company De Heus. Huy Thuan will transfer Tomking Aquatic Feedmill to De Heus, and become their distributor of aquatic food and shrimp seedlings.

“De Heus does not compete with breeders and does not desire to raise livestock, but only focuses on animal nutrition and animal feed production,” said De Heus Asia’s general director Gabor Fluit. “We look for opportunities to co-operate with Vietnamese farmers and enterprises, and form a closed value chain from farm to table, in which De Heus is the co-ordinating nucleus of the chain.”

According to Fluit, besides this project, De Heus is also hurrying completion of the second chicken hatching factory in Long An so that the factory can be in operation for the last quarter of 2019. In addition, the group is widening a pig breeding scheme in the northern province of Son La so that the first pig breeds can be imported next month. “The total investment for those projects is $20 million and we hope with our experiences we can continue contributing to the development of Vietnam’s agriculture,” Fluit told VIR.

Beside De Heus, over previous years many foreign private companies have invested in Vietnam’s agriculture like Germany’s Bayer Vietnam, the US’ Cargill, Thailand’s C.P. or Singaporean groups such as Olam and NTUC Fairprice.

According to Minister of Agriculture and Rural Development Nguyen Xuan Cuong, in 2018, there were 2,200 newly-established enterprises in the agricultural sector, an increase of 12.3 per cent compared to 2017.

There were 13,400 agricultural co-operatives, 55 per cent of which operated effectively. The number of newly established co-operatives in 2018 was 1,935, an increase of 63 per cent compared to 2017, and 35,500 farms, an increase of 1,500 farms. Household economy in rural areas continues to develop under the market mechanism and is moving more effectively.

“Despite agriculture being a field heavily dependent on the climate, it has been proven that many enterprises and individuals have been developing strongly thanks to applying new technologies, thus improving Vietnam’s agriculture as a whole,” Minister Cuong said.

Promotion of sustainable agriculture

According to Tran Cong Thang, deputy director of the Institute of Policy and Strategy for Agriculture and Rural Development under the Ministry of Agriculture and Rural Development, the private sector including domestic and foreign companies have helped change the economic structure in urban areas.

“Their investment in high technologies and production scale has helped Vietnam’s agriculture participate in the global value chain,” Thang told VIR.

He said that private investment, particularly from bigger companies, has created a spillover effect to farmers to become entrepreneurs on their own land. In addition, investing in processing plants will help to ensure market stability.

However, Thang also said that foreign direct investment (FDI) inflows into agriculture are still small in terms of project size and proportion of investment capital compared to the total FDI of the country. “By the end of 2018, the total FDI capital invested in agriculture accounted for only about 1 per cent of the total FDI investment in Vietnam,” Thang added.

According to him, factors such as a large domestic market and strong development of the export market thanks to new generation free trade agreements, as well as the encouragement of the government through last month’s Resolution No.53/NQ-CP dated July 17 on solutions to encourage and promote enterprises to invest in agriculture effectively, safely, and sustainably ​​are potential for Vietnam to attract more investment in agriculture, helping to reach more sustainable agriculture in the future.