US$4.4 billion enough to build hi-tech agriculture in Vietnam?
The government has decided to disburse VND100 trillion for farming projects to help develop hi-tech agriculture. It is the biggest-ever credit package given in the field.
Vietnam has 24 million workers in the agriculture sector, but the contribution made by the sector to the country’s GDP is 17%, and it has been decreasing for many years.
There are only 4,000 agriculture businesses out of a total 420,000 businesses in Vietnam. The figures show agriculture is losing its position in the national economy.
One of the reasons is the modest capital flow into the sector which only accounts for 10% of total outstanding loans.
However, the situation will change as the government has designed a VND100 trillion credit package, unprecedented in the history of the agriculture sector.
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It is nearly half as much of the stimulus package the government once launched to curb the economic recession in 2009, worth US$9 billion.
Agriculture has always been the sector with top priority for the state’s capital allocation.
Eight years ago, agriculture projects and farmers received US$2.9 billion, a part of the US$9 billion economic stimulus package which Vietnam launched for the first time in history.
And agriculture is still the sector to receive a lot of capital this year, though the ‘valve of credit flow’ has tightened.
This allocation is because of the close link between credit packages for agriculture and GDP growth.
Every 1% GDP investment in agriculture would help increase the GDP by 1.2%, increase the income of every farming household by 1.6 % and create at least 1 million new jobs in related fields.
The question now is if the VND100 trillion credit package will help develop hi-tech agriculture, or it will only help big conglomerates, which have been successful in their core business fields, to develop agriculture projects.
Agriculture projects promise attractive profits.
Hoa Phat Group, for example, a steel manufacturer, has jumped into the animal feed production sector. SSI, a securities company, has injected money into a seedlings company and Truong Hai, an automobile manufacturer, plans to invest in agricultural machinery.
According to Tran Minh Hai, an economist, capital flow should be addressed to farmers instead of big conglomerates.
“Big conglomerates don’t need money. They need reasonable policies to encourage them to invest in agriculture,” he commented.
“It is farmers who really need money,” he said.
