Vietnam Industrial Parks InfoGate ! Industrial Zones ! Export Processing Zones ! Foreign investors running away from agriculture

Kien Tai International, the joint venture of Centre Trading and Development Corp, Taiwanese Castro Company, Kien Giang Agriculture and Forestry Products Import – Export Company, was granted a licence in 1991 to grow 60,000 ha of forest to provide paper materials in Kien Giang province. In seven years, the joint venture developed 23,300 ha of eucalyptus forest.

However, the project proved to be unfeasible due to several reasons, including changes in land-use programming. The joint venture did not build a paper production factory as promised, while Kien Giang’s authorities could not relocate local residents in order to allocate enough land to the enterprise.

The Ministry of Planning and Investment had to release a decision to stop the operation of the joint venture before scheduled.

This is a typical example of the failure of an FDI project in agriculture. Many reasons have been cited to explain the failure of the project, including the changeable policies and the local authorities’ shortcomings in assisting the investor in site clearance.

According to the Ministry of Agriculture and Rural Development, in 1988-2008, agriculture attracted 966 FDI projects only with the registered capital of over $4.7bil, just accounting for 10% of total FDI projects, and 3.3% of the FDI registered capital.

A recent survey by MARD showed eight factors that have been affecting FDI attraction in agriculture and forestry: 1/ administration procedures 2/ workshop premises 3/ markets 4/ human resources 5/ local authorities’ policies 6/ materials 7/ social environment and 8/ infrastructure.

Of this amount, only $2bil has been disbursed. 30% of total projects have been dissolved before scheduled (the figure is 20% for FDI projects in general).

Deputy Minister of Agriculture and Rural Development Diep Kinh Tan said that Vietnam once witnessed very high foreign direct investment (FDI) in agriculture, especially in 1995, when FDI registered capital was $570mil. However, the FDI in the field has been decreasing over the last three years.

Vietnam has set the target of mobilising VND144,790bil for agricultural development in 2006-2010, of which FDI accounts for 11%. However, Tan admitted that the goal will be very difficult to attain, adding that it is even difficult to attract domestic investors to agriculture.

Experts have pointed out that Vietnam needs to build up and follow the national and regional agriculture development strategies which clearly stipulate the advantages of every area.

Proper programming will help prevent bitter things from being repeated. Farmers do not want to rush to grow litchis and then have to bargain them away due to oversupply. Enterprises will not ‘die’ because of unexpected changes in land use programming which causes the loss of material growing areas.

Tran Van Gia, Chairman of the Vietnam Tea Association, said that the tea industry strategy said that by 2020, Vietnam will have 150,000 ha of tea, but the strategy needs to stipulate how many hectares of tea will be and in which areas.

Thanh Ba-Ha Hoa area in Phu Tho province now has over 6,400 ha of tea which provides 31,000 tonnes of tea, but there are 50 processing workshops, which means that the processing capacity is 2.4 times higher than the material production capacity in the area.