Opening up capital for strong development of agriculture

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In the 2011-2020 period, investment in agriculture, forestry and fisheries is limited, only accounting for 5.8-6% of the total social investment capital. Photo: Nguyen Thanh.

Severe lack of capital

Mr. Nguyen Thanh Tan, who owns an eel farm with a scale of tens of thousands of square meters in Vinh Long, is one of the typical farmers starting a successful start-up in his homeland and making billions of dong.

From aninitial small area, Mr. Tan's farm has expanded to 19,800 square meters. It is expected that, with the current scale, Mr. Tan's eel farm will produce about three million breeds and 12 tons of commercial eels in 2020, with a total expected sales value of VND9 billion after subtracting costs of about VND3 billion. By 2021, production capacity is expected to increase to 10 million breeding eels and 100 tons of commercial eel, total revenue is estimated at about VND35 billion, profit is estimated at over VND10 billion.

During the start-up process, Mr. Tan faced many difficulties, of which the most difficult is the capital source.

"The valueof bank loans currently does not meet the need to invest in developing the model. Banks are not difficult to lend, but still require collateral. Most collateral is leased land, therefore, when assessing the asset value for a loan is not large, the loan amount can’t meet the needs.The provincial startup fund also facilitates me to evaluate the projects to access concessional loans, but the loan amount is not much compared to expectations," said Mr. Tan.

Regarding capital sources for investment in agricultural development, farmers and rural areas in general, said Dr. Can Van Luc, chief economist of the Bank for Investment and Development of Vietnam (BIDV), said the country has five types of capital for the agriculture, rural and farmer sectors, including: the state budget, the National Target Program for New Rural Areas, FDI - ODA capital, bank capital and macro financial sources.

Each year, the Ministry of Agriculture and Rural Development receives nearly VND70 trillion from the state budget, of which about VND50 trillion is disbursed, equivalent to 74%. The new rural national target program with a capital of nearly VND200 trillion per year, disbursing about VND50 trillion.

Annual ODA disbursement in the agriculture, rural and farmer sectors is about VND10 trillion; FDI capital is about VND500 billion. Disbursement from macro financial sources for the agriculture, rural and farmer sectors is estimated at about VND6 trillion per year, the rest is from bank capital.

"It is estimated that each year, about VND470-500 trillion is disbursed directly to the agriculture, rural and farmer sectors," Mr. Luc said.

The Ministry of Agriculture and Rural Development assessed that, in the 2011-2020 period, investment in agriculture, forestry and fishery is still limited, accounting for only 5.8-6% of the total social investment during the past 10 years, which is not commensurate with the contribution (from 15-20% in the same period) of agriculture, forestry and fisheries to the total gross domestic product (GDP). Low investment capital limits the ability to facilitate the application of scientific and technical progress in this field. This is also a barrier that makes linkages in production chains often unsuccessful.

Increase capital, simplify lending procedures

Mr. Nguyen Thanh Tan emphasized that because of the lack of capital to invest in production expansion, his farm currently only meets 1% of the needs of customers.

"I hope leaders of ministries and agencies consider sources of support for agriculture such as non-refundable loans or low-interest incentives for well-produced eel hatcheries, including my farms, which contribute to the development of a new profession in the home province; proceed to make a typical product of Vinh Long clean eel brand," Mr. Tan suggested.

Regarding investment capital for agricultural development, Ms. Vu Thi Minh, an expert from the National Economics University, said that in the future, it is necessary to further strengthen agricultural credit, especially credit for lending under the value chain of agricultural products, through the implementation of measures to simplify lending procedures; develop loan support and loan use consulting services.

"Arrange adequate budget sources to implement preferential policies to encourage all economic sectors to invest in the agricultural sector," Ms. Minh said.

To remove problems incapital and technology in agricultural development, especially high-tech agriculture, Mr. Can Van Luc proposed to amend the Land Law; ensure efficient allocation of agricultural capital, increasing private capital attraction, especially FDI in the farm sector; promote chain agriculture to increase the value of agricultural products; clarifying criteria for high-tech agriculture, especially copyright issues and high-tech operations.

Notably, Mr. Luc proposed the Government introduce a real agricultural insurance program to support agriculture and people in the event of natural disasters, epidemics, force majeure factors leading to crop failures, thereby encouraging the development of agriculture, rural areas and farmers.

"On the side of relevant ministries and agencies, the Ministry of Justice should coordinate with the Ministry of Natural Resources and Environment to give more detailed instructions to approve assets such as greenhouses, net houses, ponds to become collateral for loans, creating conditions for farmers to borrow concessional loans. The Central Farmers' Union should participate in the role of connecting agricultural production chains and banks participate in supporting cash flow to promote joint ventures in six sectors (farmers, the State, scientists, entrepreneurs, banks and distributors) are sustainable," Mr. Can Van Luc said.