He said his ambition is to build a modern agriculture sector that puts Vietnam among the group of leading agricultural countries. 

“Vietnam targets becoming a center in the supply of high-tech agricultural products and having an important position in global value chains,” he said. 

“Organic agriculture, clean agriculture, and high-tech agriculture, and information technology and tourism are three strengths of Vietnam as the fourth global industrial revolution approaches.”

“Clean” the trend

Before the government announced the credit package, from the end of 2015 to 2016 the agricultural sector witnessed a strong wave of investment in safe agriculture that started with non-agriculture giants such as Vingroup, the Hoa Phat Group, and the Hoang Anh Gia Lai Group.

The trend is expected to soar in 2017, with a series of large private enterprises, both domestic and foreign, announcing plans to invest in clean agriculture. 

“The sector continues to implement the overall objective of building agriculture into a modern and sustainable sector,” Minister of Agriculture and Rural Development Nguyen Xuan Cuong said, adding that safe agricultural products are a priority in 2017. 

According to the World Bank, Vietnam’s agriculture sector now stands at a turning point. It has great opportunities in both domestic and international agro-food markets but effectively competing in these will increasingly depend upon the ability of farmers and enterprises to deliver food and other products reliably and with assurances regarding quality, safety, and sustainability.

The demand for safe food is increasing quickly and becoming a priority for many city-dwellers. 

According to figures from the Hanoi Department of Agriculture and Rural Development, 10 million of the capital’s citizens are keen on clean food, especially meat and vegetables. Every day Hanoi consumes about 1,000 tons of meat, 600 tons of fish, and 3,000 tons of fruit and vegetables. 

PM Phuc launched a safe vegetables program for Hanoi and Ho Chi Minh City in December, with a commitment that any individuals and organizations working in high-tech agriculture will receive support from the government. 

Recognizing that clean agriculture will develop strongly in Vietnam in the future, Dutch group De Heus signed a contract worth $50 million with local company the Hung Nhon JSC in southern Binh Phuoc and Dong Nai provinces to build a food safety valley. 

The project will produce clean pork, chicken, eggs, and fruit and vegetables. 

Mr. Gabor Fluit, CEO of De Heus, said all breeding, husbandry and processing will meet Global GAP standards. “In recent years the cost of animal husbandry and cultivation has been quite high in Vietnam due to a lack of cooperation,” he said. 

“Cooperation between a foreign and local company will increase competitiveness in price and then produce safer agricultural products.”

Increasing urbanization, which is forecast to reach 50 per cent of the population within a decade, combined with a burgeoning middle class is expected to make clean products become more attractive than ever. 

Mr. Tran Ba Duong, Chairman of Truong Hai Auto, one of the largest private Vietnamese enterprises, recently announced investment in clean rice using high technology. 

In recent years Truong Hai has been successful in joining global value chains and leads Vietnam’s auto industry. 

Cars and rice are, needless to say, totally unrelated but Mr. Duong believes he can make the country’s rice processing industry develop commensurate with its potential.

When FPT decided to cooperate with Vinamilk to open a retail chain selling Vinamilk products, people thought it an odd mix but it’s proven beneficial to both. 

After FPT Chairman Truong Gia Binh established the High-tech Agriculture Club and became its Chairman, people understood that the technology giant was well and truly interested in clean agriculture. 

“Demand for clean agricultural products in Vietnam is more urgent than demand for mobile phones and computers,” he said.

Many enterprises, both local and foreign, boosted their investments in high-tech agriculture in 2016. 

FPT and Fujitsu announced the official completion of the FPT-Fujitsu Akisai Farm and Vegetable Factory project, which applies cloud computing technology with the aim of developing a smart agricultural model in Vietnam. 

This is an initial step within the framework of cooperative projects in smart agriculture signed by the two at the end of 2014. The project is also the first time an information technology solution in agriculture from Japan has been applied in Vietnam. 

Thirteen foreign enterprises came to Vietnam to study opportunities to produce clean pork for export to Canada. 

Mr. David Lennarz, Deputy Chairman of the US’s Registrar Corp, which assists businesses in complying with US Food and Drug Administration regulations, was quoted as saying that many US companies wish to invest in Vietnam’s food industry. 

Some are leaving China, where production and labor costs have been increasing, and heading elsewhere, including Vietnam. Registrar Corp also poured capital into and cooperated with 400 Vietnamese enterprises in the clean agriculture sector.

Remarkable recovery

The agriculture sector targets growth of 2.5 to 2.8 per cent this year, production value growth of 3 to 3.2 per cent, and total export turnover of $32.5 billion. 

Though a pivotal year, the targets for 2017 are quite low because the sector will continue to battle many difficulties after a somewhat turbulent 2016. 

 Drought and saltwater intrusion seriously hit the Mekong Delta, the central highlands, and the south-central region, creating misery among many farmers. 

In the first half of 2016 the country’s agriculture sector recorded negative growth for the first time since 2005, representing 0.18 per cent of GDP. 

Damage was estimated at VND15 trillion ($660 million), with climate change squarely to blame.

 Despite the difficulties, though, 2016 turned out fairly well. According to the Ministry of Agriculture and Rural Development (MARD), exports of agriculture, forestry and fishery products reached $32.1 billion for the year, an increase of 5.4 per cent against 2015. Rice, seafood, coffee, rubber, pepper, cashew nuts, vegetables, and wood and wooden products all saw export value exceed $1 billion.

Main agriculture exports, 2016

This was the first time fruit and vegetable export turnover exceeded crude oil, which has been the country’s strategic export item for many years. 

According to the General Department of Vietnam Customs, exports of fruit and vegetables stood at $2.3 to $2.4 billion, with fruit accounting for nearly 74 per cent. 

Export growth was also recorded in troublesome markets such as Japan, the US, France, the Netherlands, Belgium, Germany, Australia, and South Korea.

Though not standing out, seafood still proved to be a key export item, with export value of $7 billion, up 6.9 per cent. The US, Japan, China and South Korea were the four leading importers of Vietnamese seafood, accounting for 54.1 per cent of total export value. Growth was recorded in other markets, such as the Netherlands (16.1 per cent) and Thailand (12.6 per cent). Shrimp and tra fish, the two main export items, also saw positive results, with export value reaching $3.1 billion, up 5 per cent compared to 2015, and $1.67 billion, up 6.6 per cent, respectively.

Mass fish deaths, meanwhile, were seen along the central and north-central coast after toxic chemicals, including cyanide, were discharged at the Formosa Ha Tinh Steel Plant, belonging to Taiwanese conglomerate the Formosa Plastics Group, which seriously affected the processing and export operations of many domestic seafood enterprises and the prestige of Vietnamese seafood products. 

Growth of nearly 7 per cent, therefore, is evidence of the efforts made to keep the sector on track.

While fruit and seafood recorded positive results, falling rice exports were a blow to the agriculture sector. 

Export volumes in 2016 reached 4.88 million tons worth $2.2 billion, down 25.8 per cent in volume and 21.2 per cent in value against 2015. 

China remained the leading importer of Vietnamese rice, with 36 per cent. Other traditional markets declined, such as the Philippines, by 61.6 per cent, Malaysia 51.5 per cent, and Singapore 34.1 per cent. 

“These countries achieved considerable success in their food self-sufficiency policies,” a representative from the Vietnam Food Association said. “The result is that their rice imports from Vietnam are gradually falling.”

Creating value chains

While clean agriculture is increasing quickly and expected to become a trend in the years to come, agricultural value chains, which can determine the quality of products, remain limited. 

Vietnam’s agricultural chain has long been a collection of pieces, with no common thread in feed - farm - food (3F), but there are now industry giants expressing an ambition to complete an agricultural value chain.

In early 2015 the Masan Group announced it was establishing Masan Nutri-Science through acquiring a 70 per cent stake of Anco and 52 per cent of Proconco, giving it a dominant 15 per cent market share in Vietnam’s animal feed market. 

Along with developing a farm with 200,000 pigs and conducting an M&A with Saigon Nutri Food, Masan targets to create a 3F chain that is similar to the model adopted by Thailand’s CP Foods.

The small scale of most Vietnamese farms makes it difficult for agribusiness to make the most of local production, according to Mr. Nguyen Van Khai, CEO of the Pan Group. With an ambition of “Aspiring to nurture the world”, the group has invested VND1.5 trillion ($66 million) in companies such as the Vietnam National Seed Joint Stock Company, the Long An Food Processing Export JSC, and the Bibica JSC, to establish a chain providing clean agricultural products to the market.

VinEco, a subsidiary of Vingroup, has invested VND2 trillion ($44 million) to produce safe vegetables. 

Construction began in August 2015 of a greenhouse on 24.5 ha in northern Vinh Phuc province using Israeli technology and with investment of VND1 trillion ($44.2 million). 

Products are available in a separate area at Vinmart and Vinmart+ supermarkets, to help customers buy the right products.

While Vietnam’s agricultural exports are on the rise and expected to grow by between 4 per cent and 6 per cent annually, its products are perceived as being of lesser value and quality.

The government is already looking at suggestions from a World Bank report on overhauling the agricultural sector through the greater use of advanced technology and techniques for value-added processing.

According to Minister Cuong, broadening the base of the country’s export markets is also a priority. 

“In the long run, we should focus more on trade with China while expanding trade with Japan, the US, Australia, the EU, and others,” he told local media. “This is the right path for agriculture’s development.” 

VN Economic Times