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Vietnam’s agriculture sector at a crossroads Oxford Business Review

By Rey Davis-Tuplano

 

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New trade agreements, as well as a push for value-added processing, should help sustain export growth in Vietnam’s agriculture sector.

A World Bank report released in late September highlighted the need for Vietnam to revamp its agricultural sector to meet demographic, economic and environmental challenges.

The report, entitled “Transforming Vietnamese Agriculture: Gaining more from less”, suggests that the sector needs to boost value-added content and diversify its offerings to increase the country’s market access opportunities.

The recommendations are timely, given that Vietnam’s export market is expected to grow by some 500m people through the recent formation of the ASEAN Economic Community and the forthcoming EU-Vietnam Free Trade Agreement, to take effect in 2018.

From primary production to processing

As one of the mainstays of the Vietnamese economy, agriculture accounted for 17% of GDP in 2014 and currently employs nearly half of the workforce.

However, increasing urbanisation, which is forecast to reach 50% of the population within a decade, combined with a burgeoning middle class, is expected to result in a shift in consumption and employment trends in the sector.

Employment in the primary agricultural sector is predicted to decrease from its current 47% to between 25% and 30% by 2030, although much of this loss should be offset by a strong rise in jobs in the value-added component, with employment rates of up to 40%.

Domestic sales of snacks, processed and ready-to-eat foods have gained momentum in the last decade while Vietnam’s agricultural trade – which has traditionally been dominated by raw commodities – is starting to see a shift as well.

As a result, primary agriculture’s contribution to GDP is expected to decline by 0.5% annually, while agro-industry’s share could nearly double to account for roughly one-fourth of the country’s GDP by 2030, according to the World Bank report.

To this end, Vietnam is also looking to consolidate and scale its operations to meet the needs of agribusiness.

The small scale of most Vietnamese farms makes it difficult for agribusiness to make the most from local production, according to Nguyen Van Khai, CEO of Pan Group, an integrated agriculture and food manufacturer.

“Instead of dealing with one large producer, as is often the case in Western countries, companies operating in Vietnam have to deal with multiple small landholders,” Nguyen told OBG. “If you are dealing with 300 ha in Vietnam, you have to work with 300 people.”

Improving quality for export

While Vietnam’s agricultural exports are on the rise – recording a 11% year-on-year (y-o-y) increase to $10.2bn in the first quarter of 2016, and are expected to grow by between 4% and 6% annually – its products are perceived as being of lower value and quality.

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

According to Nguyen Xuan Cuong, the minister of agriculture and rural development, broadening the base of its export market is also a priority.

“In the long run, we should focus more on official trade with China while expanding our foreign trade with Japan, the US, Australia, the EU and others,” he told local media in September. “This is the right path for agricultural development.”

Currently, some 35% of Vietnam’s agricultural shipments are destined for the Chinese market, a level likely to rise this year, with exports to its northern neighbour rising 47% y-o-y in the first four months of 2016, according to ministry data.

At the end of September, the Asian Development Bank (ADB) lowered its forecast for Vietnam’s economic growth, projecting GDP to expand by 6% this year, down on its initial estimate of 6.7% made in March. The bank also revised its outlook for next year to 6.3% from earlier estimates of 6.5%.

One of the key reasons for the downward revision was the weaker performance of Vietnam’s agriculture sector, with the ADB citing recent drought conditions in the Mekong Delta and Central Highlands regions, along with falling global commodity prices impacting export returns.

Environment for change

In addition to the effects of climatic conditions on output, the environmental impact of poor agricultural practices is also becoming a growing concern for the sector, as Vietnam looks to expand its industry for export.

‘“Business-as-usual’ is no longer an option for the sector – growth has slowed down, it is vulnerable to climate hazards and leaves a large environmental footprint,” Ousmane Dione, country director for Vietnam at the World Bank, said at a press conference in September.

In early October, for example, tonnes of fish washed ashore at West Lake, Hanoi’s largest freshwater lake, while in April an incident at Formosa Ha Tinh Steel’s plant led to fish deaths, local media reported.

In a bid to address environmental issues, a joint delegation from the Ministry of Industry and Trade and Ministry of Environment and Natural Resources is planning to look into factories’ production and waste treatment facilities, which pose a risk to water contamination, according to press reports.

At the same time, the private sector is also looking to boost efforts in this area.

“Resources and waste management are key sectors in which foreign firms are able to contribute to Vietnam’s development,” Guillaume Crouzet, general director of the French Chamber of Commerce in Vietnam, told OBG. “One of the elements that helps a foreign firm decide to invest in Vietnam is access to proper resources.”

This Vietnam economic update was produced by Oxford Business Group.

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Doing Agri-Business in Vietnam Webinar


The webinar Doing Agri-Business in Vietnam was successfully held by BBGV on February 17, 2017. The invited experts, in the role of stakeholders, have provided valuable information on overview of agri-business in Vietnam, updates on recent legal frameworks for registering new agri-tech items (machinery & equipment), agricultural stuffs (animal feeds, feed additives, and fertilizer); and practical experiences in doing agri-business in Vietnam.

Please click download the full Audio and Presentation

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SCC – New Global Delivery Centre opened in Ho Chi Minh City

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source: UKINVIETNAM


With the key support from The Business Centre- British Business Group Vietnam (BBGV), SCC has successfully launched its second Global Delivery Centre in Ho Chi Minh City on February 24, 2017. The inauguration ceremony welcomed the participation of Dr Liam Fox - UK Secretary of State for International Trade, along with SCC founder - Sir Peter Rigby.

SCC, with 40 years of development, is the largest independent IT group in Europe, which not only provides businesses with quality IT infrastructure solutions and services, but also contributes to UK national charities and heritage.

After the earlier approach to Vietnam with a Preferred Partner framework agreement signed with Vietnamese software giant FPT Software in September 2016, SCC’s operation expansion to Vietnam has marked its “another important strategic milestone for the business”, said CEO James Rigby. The new operation also contributes to enhance the business partnership between two countries.

In his speech, Sir Peter Rigby sent great appreciation to the organizations, including BBGV, for the enthusiastic assistance to SCC expansion plan. With £32m revenue generated in fiscal year 2016, the new Centre aims to deliver great support to clients in both Eastern and Western areas.

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British Education Mission to Vietnam

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BBGV was pleased to welcome the British Educational Suppliers Association (BESA) on their Mission to Vietnam, on the 6-9th March 2017. BBGV provided support to the Mission in conjunction with the Department of International Trade.

The BESA mission included visits to both Hanoi and Ho Chi Minh City. The delegates were kept busy during their time in Vietnam and met with representatives of the Department of Education and Training as well as many representatives many educational establishments including Vietnamese Schools, Universities and International Schools, publishers, importers and distributors.

In his welcoming speech in Ho Chi Minh City, the Consul General Ian Gibbons made reference to the world class educational technology offered by BESA members. He also commented that the mission fitted well with the Strategic Partnership Agreement signed in 2010 in which Education was one of the seven priority focus areas for cooperation between the UK and Vietnam Governments.

Mr Pham Ngoc Thanh the Deputy Director of Ho Chi Minh Department of Education and Training in his speech confirmed the need for further development for English Language and ICT within the Vietnamese school system.

Presentations were made to an appreciative audience at the mini workshop by nine members of the UK educational suppliers industry including Boclips, Collexi Limited, Cambridge University Press, Data Harvest Group Ltd, Discovery Education and Hodder Education, RM Results, WCBS and Zzish

Following the workshop, the mini-exhibition took place where members from BESA met with many Vietnam based companies on a 1-2-1 to discuss the opportunities of working together.

The mission concluded with BESA members visiting the British International School and the International School of Ho Chi Minh City.

 

Photos from the event

 

 

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UK Secretary of State for International Trade Liam Fox visit to Vietnam

BBGV was proud to support the recent visit to Vietnam by Dr Liam Fox MP, UK Secretary of State for the Department for International Trade and President of the Board of Trade.

 

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Dr Fox’s held a number of ministerial meetings, of which, Brexit and future trade relations were a key theme. At the meeting with Vietnam Prime Minister Nguyen Xuan Phuc, the positive messaging from Lord Price’s visit in October that the UK would remain a key trading partner for Vietnam was reinforced. The Prime Minister warmly welcomed Dr Fox’s reassurance that the UK continues to support entry into force of the EU-Vietnam FTA and there was strong ambition from Vietnam to move forward the trade and investment dialogue to facilitate growth following Brexit.

At the meeting with the Chairman of the Ho Chi Minh City’s People’s Committee, Mr Nguyen Thanh Phong, Dr Fox emphasized the goodwill from UK to keep enhancing the cooperation and relationship between the UK and Ho Chi Minh City. Dr Fox and Chairman Phong particularly discussed the UK offer on education, smart cities and infrastructure development.

Also in this visit to Ho Chi Minh City, Dr Fox visited Landmark 81 which once completed will be the tallest building in Vietnam. British companies Atkins, Arup and Mace have all had a leading role in delivering this project.

In the theme of harmonious cooperation between Vietnam and UK, Dr Fox, along with sir Peter Rigby, founder of SCC-Europe’s largest independent IT group, formally opened its second Global Delivery Centre in HCM City. With the support from BBGV for the initial stage, the company is looking at a long term high quality investment in Vietnam with strong plans for further expansion.

Dr Fox’s visit concluded with a keynote address at a reception hosted by the British Business Group in Vietnam and attended by leading UK and Vietnamese businesses, where the Secretary of State outlined to a receptive audience the Government’s vision for the UK in a post-Brexit world.

 

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