The Ministry of Agriculture and Rural Development is drafting a Government decree offering many incentives for more foreign direct investment (FDI) firms committed to agriculture and creating a level playing field for all businesses in the sector.

Despite many incentives launched earlier, the sector has drawn just over 1% of total FDI capital registered for projects in different industries in the country, heard a seminar held in Hanoi on July 13 to collect comments on the draft decree.

Flavio Corsin, Vietnam manager for IDH Sustainable Trade – a cultivation program developing organization, told the seminar that FDI companies have yet to receive the same treatment as domestic firms and that this is one of the reasons why they have not invested heavily in agriculture.

For instance, foreign coffee enterprises are not allowed to buy material directly from farmers and they have to purchase from agents. FDI firms also cannot take part in associations to contribute to policies like local enterprises.

FDI firms can buy coffee from farmers at higher prices for better quality products but they are criticized for taking advantage of growers, Corsin said.

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

Besides, the Government has issued land and tax laws for FDI firms in general and for the agriculture sector in particular. However, there have been no support policies and measures for FDI companies in the sector.

In recent years, Vietnam has used the incentives applicable to the industrial sector for agriculture, Dung said.

Therefore, the draft decree has been made 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.

Notably, the draft decree proposes a 10% corporate income tax reduction in 15 years for FDI enterprises 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 dormitories for workers, vast green and public facilities.

Corsin proposed supporting FDI firms to buy materials directly from farmers and join industry associations. The Government needs to a build up a strong linkage between State agencies and businesses.

As estimated, the draft decree will be submitted to the Government in the third quarter of this year.