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HomeEconomyBusinessGreen growth is an advantage to attract FDI into Vietnam's agriculture

Green growth is an advantage to attract FDI into Vietnam’s agriculture

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The adoption of National Green Growth Strategy in the period of 2021 – 2030 is considered an advantage for Vietnam in attracting foreign investment in agricultural sector, thereby best exploiting potential advantages of agriculture, creating high-value products to participate in the global supply chain.

Mr. Vu Thanh Liem, Deputy Director of Department of International Cooperation, Ministry of Agriculture and Rural Development (MARD), said that from 2010 to present, agricultural, forestry and fishery production GDP growth rate has remained stable, average increase of 2.83% per year. The agricultural sector not only firmly keeps national food security but also contributes to international food security. The quality of agricultural products has been increasingly improved, the added value in the agro-forestry-fishery processing industry has increased by 8 – 10% every year.

To achieve this result, the foreign investment sector also makes a very active contribution. Accumulated for the period 2009 – 2021, nearly 2,000 foreign projects have been invested in Vietnam’s agriculture with US$ 17.6 billion, focusing on processing and trading of agricultural products, contributing to the restructuring of Vietnam’s agricultural economy in the direction of diversifying production categories, creating new varieties of plants and animals for high productivity and quality; upgrading technology, transforming methods of faming and improving the competitiveness of Vietnam agricultural products.

Nestlé Vietnam is one of the prime examples on the success of foreign investment in Vietnam. Currently, the company’s products are exported to more than 30 markets around the world, including difficult ones like the EU. In particular, Nestlé Vietnam’s export products are mainly high-value categories and processed by modern technology. Currently, the total foreign investment value of Nestlé Vietnam has increased to US$ 730 million.

However, experts estimate that FDI in agriculture is still limited which has not brought into full play the comparative advantage of Vietnam’s agriculture. Specifically, the total number of valid cumulative agriculture projects accounts for only 5.7% of the total number of foreign investment projects.

According to Dr. Nguyen Anh Phong, Institute of Policy and Strategy for Agriculture and Rural Development, the cause of this situation is that the Government’s support policies have not yet met the requirements of foreign-invested enterprises to extend their investment in agriculture. In particular, the regulation preventing foreign-invested enterprises from directly purchasing agricultural products causes difficulties to develop agricultural projects in Vietnam.

The legal environment for technology transfer to Vietnam through foreign-invested enterprises is still limited which has not yet created motivation for technology diffusion for domestic enterprises. Regulations on using and transferring new technologies are far from strict. Dr. Nguyen Anh Phong also pointed out that many enterprises need to have big areas and clean land or cooperatives for raw materials. However, current regulations prevent foreign enterprises from directly cooperating with cooperatives or producers.

To strongly attract foreign investment flows into agriculture, experts say the most fundamental solution is to improve the investment environment. Specifically, it is necessary to promote reform of administrative procedures related to the entire investment process; review, abolish and simplify administrative procedures, investment and business conditions; strengthen the enforcement of standards and regulations for agricultural products in general to limit counterfeit and smuggled products as well as increase demand for certified products.

In addition, land policies also need to be improved so that localities can proactively prepare clean land within their capacity for investment projects, land area planning for logistics infrastructure, warehouses and processing plant near the raw material area. Dr. Phong also commented criteria should be improved to attract foreign investment selectively to high added value of agriculture, spread effects and connect domestic production with global chain. In particular, the criteria to be developed include labor, technology, technology transfer, connectivity, environment, defense and security, etc.

Mr. Vu Thanh Liem also said that the Scheme on foreign investment attraction in the agricultural sector by 2030 is under finalization by MARD, expected in December 2022. Accordingly, the focus will be on attracting more investment activities using high technology and skills and maximizing added value in the supply chain, creating a large number of jobs, narrowing the economic development gap between provinces and cities and serve as a basis for the growth of new generation FDI investment.

According to EuroCham’s representative, under the impacts of climate change, environmental pollution, natural resources are gradually depleted, the wave of green consumption is becoming more and more popular, the green production gradually inevitable trend and considered a link in the green growth strategy. Therefore, EuroCham members expect Vietnam to strengthen green economic development, considering the green economy as a driving force to attract foreign investment.

Currently, Vietnam has approved the National Strategy on Green Growth in the period of 2021 – 2030, aiming to accelerate the process of economic restructuring to effectively use resources and reduce greenhouse gas emissions with technology application. Green growth is a pioneer of sustainable economic development towards a low-carbon economy and natural capital growth. This will contribute to the competitiveness of investment in Vietnam. The representative of EuroCham also pointed out that EVFTA comes into effect from 1/8/2022 and helps EU and Vietnam parties gain legal safety, and at the same time identify risks and benefits from new opportunities for green and sustainable development. EVFTA and EVIPA (after being ratified by EU member countries) have the potential to boost FDI inflows from European countries into Vietnam, especially in the context that Vietnam is expected to significantly grow thanks to capital inflows and constantly improve its productivity. Investment resources from Europe are of top quality and can benefit by helping to spread clean and environmentally friendly technologies. To take advantage of EVFTA, environmental factors also need to be focused. Chapter XIII of EVFTA has emphasized the essential task of facilitating trade and investment in environmental products and services.

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