Vietnam’s Agricultural Sector Sees Strong Growth Thanks to FDI

February 26, 2014 Posted by Vietnam Briefing Reading Time: 3 minutes

HANOI – Known as the “Asian rice bowl,” Vietnam exports around six to seven million tons of rice each year. The country is situated in a very favorable location for agricultural production. In particular, the country benefits from its good weather, fertile soil, and large workforce.

Over the past few years, there has been a marked increase of FDI into Vietnam’s agricultural sector. Previously, this area had been relatively unattractive to foreign investors; however, with the fast approaching conclusion of the Trans-Pacific Partnership (TPP) negotiations, Vietnam’s agriculture industry is becoming increasingly enticing. This Free Trade Agreement (FTA) removes tariffs and other trade barriers between the signatory countries, which include the United States, Vietnam, Australia, Malaysia, Singapore, and other countries in the Asian region.

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Another important FTA between Vietnam and the EU is currently under negotiation and will have a major impact on Vietnam’s agriculture.

These FTAs and the incentives offered by Vietnam’s government are predicted to dramatically increase foreign investment into the agricultural sector.

Once the existing trade barriers have been removed, Vietnam’s agricultural products will have an unimpeded path to some of the largest markets in the world.

Among the countries leading the investment charge into Vietnam’s agricultural sector are Japan, Australia, and Israel. These countries, and others, are bringing modern technologies and large amounts of capital to Vietnam. This has helped the country produce greater amounts of crops and has strengthened the brand image of Vietnam’s products.

A Further Incentive for Growth

The Vietnamese government has promulgated a series of legal decisions that aim to boost FDI investment in the agriculture sector. On February 7, 2014, the Ministry of Industry and Trade (MOIT) released Circular No.02 which states that material imported to Vietnam intended for domestic agriculture production will be exempted from import tax.

Decree No. 210/2013/ND-CP was also released in order to increase the incentives offered to investment projects in the agriculture sector. This decree stipulates that investors owning preferred investment projects related to agriculture will receive a 70 percent reduction in land-use fees. Additionally, investors who own incentive agricultural projects will be entitled to a 50 percent reduction on their land-use fees. These reductions are intended to attract more FDI and strengthen the development of the country’s agricultural industry.

For such agricultural projects, the government will also provide the following monetary support:

70 percent of domestic training costs;
50 percent of fees for the mass media advertising of an enterprise and its products;
50 percent of expenses for domestic exhibition fairs;
70 percent of expenses for executing the research as chaired by the concerned enterprise, and inventing new technology to complete the projects;
30 percent of the total investment cost for implementing experimental production projects

Furthermore, the Vietnamese government will also provide a 50 percent reduction in the cost of accessing market information and associated service fees charged by the government’s trade promotion agencies.

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