Vietnamese Agtech, 2017 & Land Law Reforms

If you are an agtech startup in Vietnam, get ready for 2017. Prime Minister Nguyễn Xuân Phúc has established 2017 as a year of significant restructuring of the entire agricultural sector. An indication that the sector will be transformed can be seen in a Memorandum of Understanding (MoU) signed between the Ministry of Agriculture and Rural Development (MARD) and the Ministry of Industry and Trade (MoIT), the two ministries will work closely to improve output and quality of products and add value as per market demand.

Most importantly, for agtech startups, PM Phuc has emphasized three aspects all designed to transform the Vietnamese agricultural sector into a high-tech 21st century system. The three things he is emphasizing are — 1) eliminating limits on amount of land a farmer can own, 2) increasing access to credit and financing for companies connected to agtech and 3) increasing collaborations with foreign experts.

Image taken from https://agfundernews.com

Revising the Land Laws

One of the major impediments to agricultural reform is the Land Laws which restrict the amount of land that can be used for farming. PM Phuc has asked the Ministry of Natural Resources and Environment to work closely with other agencies to revise the Land Law and facilitate large scale agricultural production, particularly through land aggregation. MARD has followed through and Minister Nguyen Xuan Cuong has instructed the Ministry to work with the Ministry of Natural Resources and Environment and other relevant agencies to make recommendations for amending the Land Law in a way that facilitates the implementation of large-scale farming projects. In addition, he has suggested that the central bank should take policy steps that encourage banks to lend to agricultural investors while the Ministry of Planning and Investment is assigned to find ways to raise funds for agricultural development in the medium-term public investment plan.

Making 2017 a year in which the Land Laws are transformed so that Vietnam can develop from small-scale farms into a modern 21st agriculture sector would be a significant development. I believe that reforming the Land Laws so that farmers can grow on larger territory is going to be (or should be) a significant part of the developmental discussion during 2017. The Vietnamese Government, at all levels, I believe (I hope), will be working to create policies to develop the market for agricultural land use rights and propose amendments to the Law on Land in favor of large-scale agricultural production.

In addition to instructing MARD, PM Phuc also instructed the State Bank of Viet Nam to research and develop policies which enable credit institutions to develop agricultural lending. Finally, the Ministry of Planning and Investment and the MARD were requested to add more capital for the agricultural sector in the medium-term public investment plan.

Billions in Loans are Being Prepared

In addition to discussing reforming the Land Laws, the Vietnamese Government has announced plans to grant loans worth up to VND60 trillion ($2.6 billion) to develop high-tech agriculture in the country. The package will be provided through a number of commercial banks with favorable lending terms. The PM also agreed with a proposal that will have the State Bank study and make changes in credit ceilings for the agriculture industry. He also asked the MARD to revise Decree 210/2013/NĐ-CP on encouraging enterprises to invest in agriculture. Finally, PM Phuc has decreed that the five biggest commercial banks “must create the best conditions to serve farmers, organisations and localities wanting to develop high-tech agriculture.”

In addition to this, the Vietnamese Government will be offering preferential treatment to farmers involved in high-tech agriculture. Preferences will be given to:

  • Farmers and localities engaged in high-tech agriculture
  • Technical barriers to stop cheap imported food, promote trade promotion and engineering and automation for reducing agricultural machinery; encourage super-market to consume hygienic and safe food
  • Land fund to take back land and support compensation.
  • The Ministry of Health for increasing food safety inspection

HCMC and the Mekong Delta are Planning on Agtech Spending

Ho Chi Minh City is calling for investment in a high-tech agricultural development program that is expected to cost VND2,6 trillion ($114 million) as the city aims to boost its agricultural output. Authorities are hoping to draw 53 percent of the investment from the state budget and 47 percent from the private sector for the five-year plan. In the first year, the city plans to spend VND2,1 trillion ($92 million) on building a high-tech agricultural zone and a biotechnology center, in addition to staff training. HCMC has already completed the first phase of a high-tech agricultural zone with an 88-hectare park in Pham Van Coi Commune, Cu Chi District. The city is aiming to expand the area to 570 hectares by 2020 while offering preferential policies to attract investors to the zone’s new facilities.

The Mekong Delta is currently calling for investment in 50 projects in agriculture, with a projected total investment of $1.385 billion, according to VCCI Can Tho. Dung said more and more foreign investors were coming to the delta to explore business opportunities, adding that foreign direct investment (FDI) in the region had increased sharply in recent years. As of last year, FDI in the region had reached 13 per cent of the country’s total FDI, a sharp rise from 5 per cent recorded for many years, according to the agency.

The Government has offered incentives for foreign investors in preferred sectors and geographic areas. The incentives include reduced corporate income tax rates, tax holidays, special enterprise zones, favourable permitting and licensing procedures, exemption from land rent, and other policies that reduce costs and complexities for foreign investors. Từ Minh Thiện, head of the management authority for the HCM City High-Tech Agriculture Area, said the region would emphasise the use of high technology in businesses and cultivation areas. In the next five years, the production value of high-tech agriculture would account for 30–35 per cent of total agricultural production. Thiện said it was necessary to establish high-tech agricultural zones, which would play a crucial role in sustainable development. He also emphasised connectivity between bio-technology centres and high-tech agricultural zones, and improving the training of human resources in high-tech agriculture. Policies for businesses to invest in high-tech agriculture and a high-tech agricultural forum where technical issues and market initiatives can be discussed are also needed in the Mekong Delta, Thiện said.

Conclusion

Vietnamese agtech startups are at an ideal place. The government, I believe, is going to be making major reforms to the Land Laws which will make it easier for high-tech modern agriculture to develop. This will attract more FDI to develop farms. Vietnamese agtech startups can take advantage of these changes in laws, the increase in FDI and also utilize what should be a friendlly banking system that emphasizes loans to high-tech agriculture. I truly believe the signs are there for 2017 to be a transformative year for the Vietnamese agricultural sector and Vietnamese agtech startups should be prepared to work with FDI and create Vietnamese solutions to Vietnamese problems.