VietNamNet Bridge - Rural areas and the agriculture sector
have provided the main impetus for the nation’s rapid growth in the post doi
moi (renewal) period, but the sector has not received sufficient investment or
help from the Government, experts say.

Viet Nam’s
rural areas are still thirsty for funds to develop production and trading
activities because capital injection from the Government has been relatively
modest, a Thoi Bao Kinh Te Sai Gon (Sai Gon Economic Times) report cites
several experts as saying.

Between 2003 and 2007, the State’s investment in agriculture
met just 17 per cent of the sector’s demand. The Ministry of Agriculture and
Rural Development has, in fact, reported that investment in rural areas and
agricultural production has decreased in recent years.

In spite of accounting for 20.91 per cent of the GDP (Gross
Domestic Product) in 2009, total capital invested in the agricultural sector
accounted for just 6.26 per cent of total State budget revenue, 0.19 per cent
lower than 2008.

The percentage is considered to be much lower than in
regional countries including South Korea,
Malaysia and the Philippines
where agricultural investment often accounts for more than 20 per cent of their
total State budget revenue.

Dr Nguyen Thi Kim Thanh, director of the Banking Strategy
Institute, said the source of capital injected into rural enterprises and
individuals were bank branches operating in localities, the Viet Nam Bank for
Social Policy, credit funds, small scale financial institutions, programmes and
projects funded by the Government and non-governmental organisations.

Between 2005 and 2009, the capital that the Government
pumped into projects in rural areas increased by an average of 12 per cent per
year. However, in 2009, this accounted for just 1.04 per cent of the GDP,
according to Pham Huy Hung, chairman of the Viet Nam Bank for Industry and
Trade.

Dr Nguyen Minh Phong of the Ha Noi-based Institute for
Socio-economic Development also revealed that the Government’s investment into
capital construction in rural areas was too small at just VND9.91 trillion
(US$200 million) in 2009.

The country should have invested much more in the
agricultural sector since the World Trade Organisation (WTO) allows
agricultural subsidies to account for 10 per cent of the agricultural sector’s
GDP (equivalent to US$1.2 billion) in addition to VND4 trillion ($200 million)
from the State budget, Phong said.

The agricultural sector was not an attractive investment
area for both domestic and foreign enterprises because of inherent risks such
as crop failures caused by bad weather, pests and diseases, Thanh said.

Poor infrastructure in rural areas has limited their
capacity to attract capital sources including foreign direct investment. FDI
projects in agriculture now represent just 0.59 per cent of the value of the
country’s total.

Credit organisations also exercised undue caution in rural
areas, said Nguyen Huu Nghia, director of the Department of Monetary
Forecasting and Statistics under the State Bank of Viet Nam.

The banks’ loans to the agricultural sector in 2009
accounted for just 15.55 per cent of the total, Nghia said.

Explaining the situation, Thanh said most banks preferred to
lend to high and stable income earners who wanted big loans rather than to poor
people. The latter usually needed small loans and faced high risks, which
pushed up the banks’costs.

Phong of the Institute for Socio-economics Development said
that Viet Nam’s
policies were not attractive enough to divert capital sources from society into
agriculture and rural areas.

He suggested the Government strengthen credit activities in
rural areas.

Source: VNS