Despite the Government’s recent effort to support enterprises in the agricultural sector, the sector continues to fail to lure investment because of its low profits and high risks, said agricultural experts.

Nguyen Phu Hung, deputy head of the Enterprise Reform Department under the Ministry of Agriculture and Development (MARD) said most enterprises in the agricultural sector were of small-size with modest capital, making it hard for them to provide security for bank loans.

According to a recent report from MARD, 90 per cent of agricultural enterprises have capital smaller than VND10 billion (US$476,000). The ministry also reported that the average capital spent on each employee of those enterprises was only VND200 million ($9,500) a year, which is only a third of the average spent on one employee over all economic sectors.

“Small enterprises that lack a feasible business plan and have only a modest financial capacity are very difficult to apply for loans at banks,” Hung said.

He also said small businesses also faced difficulty in accessing international markets because they lack information on regulations set out by organisations such as the World Trade Organisation.

Another issue agricultural enterprises are facing is the complicated process to apply for agricultural land, according to Hung. “The Government has requested local authorities to set up and publicise available land and their use, but to date, it has still been very difficult to access available land,” he said.

Tran Le, general director of Agro-Forest Technology Muong Phang, who has had 30 years’ experience in investing in growing vegetables and flowers in the Central Highland city of Da Lat now wants to expand the business to the north, such as Hoa Binh Province. “To date, we haven’t been able to apply for bank loans in Hoa Binh because the process is very complicated. They required us to mortgage our properties in Da Lat. It’s impossible for us to do that,” he said.

Le added that the banks doubted his business plan because it was focused on a remote rural area and they though it too risky. “I’ve tried to persuade them that Hoa Binh has similar weather to Da Lat so it should be easy and profitable to grow the same flowers and vegetables as in Da Lat. I started growing squash and orchids and they’re developing well. But I’ve not managed to persuade a bank yet,” he said.

For farmers to start businesses in remote area, it is even more difficult because of additional transportation costs and higher electricity prices, he added.

According to the General Statistics Office, Viet Nam has over 8,600 agricultural enterprises, accounting for over 4 per cent of enterprises in all sectors. Agricultural business accounts for over 20 per cent of the country’s gross domestic product (GDP). Agriculture plays a crucial part in the country’s social welfare as over 70 per cent of the population live in the countryside, of which about 50 per cent are working in agriculture.

Deputy minister of MARD Bui Ba Bong said the ministry would give priority to improving the capacity of enterprises, implement new technology and research new methods to help the sector integrate in the global market. These moves are part of a push to increase the competitiveness of the agricultural sector.

Source: VNS