In the 1988-1990 period, the figure stood at 26.6 percent of total annual FDI, but it dropped to 8.3 percent in the 1991-1995 period and remained at only 6 percent in 2008. By the end of August last year, the capital disbursement in the agricultural sector was only US$2.2 billion, about 5.37 percent of the country’s total registered FDI.
The main reason for a dramatic drop in FDI inflows in recent years is the high risk of weather dependency and poor infrastructure in rural areas getting involved in agro-forestry production, said the Ministry.
Severin Kodderitzsch, Advisor of the World Bank on Agriculture and Rural Development (ARD) Department said that investors were not keen on agriculture.
The other reason is an incoherency in policy, making people in many areas across the country reluctant to invest in many projects which are closely associated with their livelihood, he said.
Sharing this point of view, a representative from the French Development Agency (AFD) said his Agency has funded 16 projects worth at least Euro 325 million in agricultural development during its 15 years of operation in Vietnam. Half of the projects, valued at Euro 147 million, focused on agriculture and food processing and the other half on infrastructure. However, some projects failed to pay off due to disagreements between the Ministry and the regional administrative agencies.
Deputy Minister of Agriculture and Rural Development, Diep Kinh Tan admitted that despite offering incentives to agricultural production, Vietnam still has fallen short of foreign investment for lack of diversity and balance. Here and there, there is not enough land for agricultural production except some projects to provide seeds and process cattle food. In general, most of the foreign-invested projects are slow-going and face a high risk of hitting the wall.
The Ministry has recently drawn up a list of projects that need FDI in the 2009-1015 period and submit this to the Government for approval.
The Deputy Minister emphasised the need to prioritise policy for the agricultural sector as it plays an important role both in economy and society. In other words, investment in agricultural projects must be maintained at a realistic rate.
“The State should have an appropriate policy to ensure effective and balanced investments in this sector,” he said.
He also pointed out that the excessive use of agricultural land for industrial projects as well as ineffective credit mechanism could put the agricultural sector in a disadvantaged position.
In 2010, over all planning for agricultural land use should be finalised along with other incentives to attract foreign investment in agricultural projects.
The Ministry has called for a greater effort in creating a strong, effective commodity agriculture with special preferential treatment to forestry, planting on fallow or deserted land, offshore fishing and salt making, pesticide production, processing of agricultural produce and development of traditional handicrafts.