Businesses Must Be Proactive in Developing Global Agricultural Value Chains

24-Oct-2019 Intellasia | VCCI News | 6:02 AM Print This Post

In order for Vietnamese agricultural products to join global value chains, businesses must be an important link. Entering the global playing field requires them to have the potential, abundant connections and stronger cooperation to improve product value to sharpen their competitive edge in the international arena.

Potential to join global agricultural chain

According to a report from the Ministry of Agriculture and Rural Development, Vietnam now has 1,478 models of agricultural production and consumption chains with 1,462 products, mainly fruits, vegetables, rice, coffee, pepper, cashew nuts, tea, chicken, pork and pangasius. The country has been building up 3 agricultural products as key pillars to agricultural restructuring: Pangasius, forest products and rice.

Nguyen Quoc Toan, director of Agricultural Product Processing and Market Development Department under the Ministry of Agriculture and Rural Development, assessed that Vietnam’s agricultural, forest and aquatic products have advantages and opportunities to boost exports thanks to tax incentives from Japan, Malaysia, Singapore, Brunei, Australia, New Zealand and other countries. In particular, many CPTPP member countries pledged to open markets for Vietnam’s agricultural products. Especially, Australia removed 93 percent of its tariff lines, equivalent to about 95.8 percent of Vietnam’s exports to this market, right after the enforcement of CPTPP Agreement. Remaining products will have tariffs eliminated in the fourth year.

Therefore, to boost the consumption of agricultural products in the near future, it is necessary to promote the building of national brands and trademarks, develop and scale up the granting of production area codes and traceability certificates to meet the competitiveness in the integration trend, he said. Along with that is the institutional reform, the legal corridor perfection and business climate improvement.

A representative from the Department of Cooperative Economy and Rural Development under the ministry said that, in order to promote the linkage and increase the added value for agricultural value chains across the country, it is necessary to raise awareness and change habits of cooperatives and producers to make what the market actually needs. It is important to make safe products that meet all food safety and environmental protection standards and regulations to sign contracts for sustainable product consumption.

In addition, Vietnam needs to boost the capacity of businesses, cooperatives and farmer households through training courses and technical guides on producing and processing agricultural products, disseminate knowledge of international economic integration and conditions for agricultural products to enter modern distribution channels.

Furthermore, it is essential to review, supplement solutions and remove policy problems such as accessing credit capital, arranging resources to execute encouragement and support policies for collective economic development; focus on supporting the development of high-tech applied cooperatives to scale up value chain-based connectivity and product safety standards; and focus on branding and marketing products.

Weak business connectivity

The agricultural sector is engaging more and more corporations and enterprises to join. Currently, the country has 9,235 enterprises engaged in agriculture, forestry and fishery (the average capital of a company is VND17.8 billion).

According to Hoang Quang Phong, vice President of the Vietnam Chamber of Commerce and Industry (VCCI), Vietnam is a strong agriculture-based country as it can produce what the world needs. However, the potential and strengths of its agricultural products have not been brought into full play. Our companies mainly supply raw agricultural inputs while the added value of agricultural products comes primarily from processing, packaging and trading activities. 80 percent of agricultural products are sold to the world by foreign brands. In other words, Vietnam has only taken part in the least-valued stages in global agricultural value chains like supply inputs while lacking focus on value-added stages like processing and packaging. Furthermore, it remains difficult for companies to access bank credit for agricultural investment.

Many experts also affirmed that the linkage among agricultural companies remains weak and there are not many organic agricultural chain models. Contracts among stakeholders are not tight enough and contract breaches are still common. Although the signing of a series of free trade agreements has enabled us to further expand the market for our strong products, with the above weaknesses, the agricultural production and processing industry still face substantial challenges.

Strengthening engagement of businesses

Standing deputy minister of Agriculture and Rural Development Ha Cong Tuan affirmed that business connectivity is extremely important and businesses are the pioneering force in all public cooperation models. They penetrate the world market and understand international regulations and they can educate people to produce, process and package in the fashion the world market favours as well as sell products for them. Such connectivity and cooperation are essentially strengthened and diversified towards safe, traceable and higher value-added agricultural production.

State policies substantiate that in a very diversified range of connectivity, business role is prerequisite. “Vietnam has favourable conditions with the dense business and cooperatives system and a great number of agricultural scientists in addition to governmental supports; there is no reason for us to lack motivation to spur our entry into global export chains,” Tuan said.

Although their important role in the agricultural value chain is repeatedly affirmed, many businesses attending at the forum still share a common concern: Land and particularly finance. Nguyen Danh Vung from the Thai Binh Farmers Association noted that farmers and companies have not yet met in the current agricultural production. The former does not have money but land, and the latter does not have land but money. We lack mechanisms for them to reach each other to establish a closed chain for mutual development.

“In the context of open production, we have a good enterprise and cooperatives network, scientists and State backings. We see this as a motivation to promote connectivity and participation in the global value chain. We will have to do this and I believe that we will do it very well. We must be determined to do it. This is a very important message at this forum,” said deputy minister Ha Cong Tuan.

At the forum, many businesses hoped for further support from the government, including more preferential policies on credit to establish chain links. Only connectivity will help Vietnamese agricultural products to gain a foothold in the global value chain.

Solutions for businesses to join global agricultural chains

Nguyen Van Trung, Department of Cooperative Economics and Rural Development, MARD

It is important to boost communications to raise awareness and change habits of cooperatives and producers in production to make what the market actually needs and make organic products that food safety and environmental standards and regulations to sign product sale contracts.

Pham Hoang Van Anh, World Bank’s Specialist in Vietnam

World food demands will increase from 70100 percent by 2050 due to population growth and meal changes. In order for Vietnamese agricultural products to seize opportunities and participate deeply in the global value chain, Vietnam needs to build quality infrastructure to increase competitiveness because this is a key factor for the development of the agriculture and food industry.

Pham Thai Binh, general director of Trung An High-tech Agriculture JSC

Everyone from enterprises to farmers desperately need the so-called large field model together with the value chain. But this right, effective and necessary model has not been developed and scaled up. Even, in recent rice crops, the area of this model has shrunk in many places. This reality is attributed to capital shortage, both medium-long term and short term. If businesses can borrow enough capital to carry out the large field project, it will take only 3-5 years for the rice industry in the Mekong Delta in particular and in Vietnam in general to develop more sustainably.

Pham Thi Thanh Tung, director of Agricultural Sector Credit Bureau, Credit Department for Economic Sectors, SBV

Coordinated production reveals many limitations due to weak cooperation in the value chain, loosely regulated contracts and frequent contract breaches. This reality makes it difficult for credit institutions to control cash flows when they lend value chains. Many agricultural companies fail to meet borrowing conditions due to lack of business and production plans, limited owner’s equity and financial capacity, unclear financial information and insufficient collaterals. For that reason, it is necessary to improve customer credit ratings to access unsecured loans which will be very useful for agricultural enterprises.

Park Hyang Jin, general director of Dreamfarm Company, South Korea

The weakest point of Vietnamese agricultural enterprises is limited production and processing technology while State support policies fail to produce effects and the cooperation among companies to raise agricultural product values remains ineffective. Vietnamese companies need to invest in technology, from production to processing, packaging and consumption of products, and ensure that the entire process is properly controlled according to given standards.

Nguyen Hong Phong, general director of Tien Nong JSC

International economic integration gives a great chance for Vietnam to boost Vietnamese agricultural exports. However, if it merely exports crude products of low added value, it will a big disadvantage for Vietnamese farmers. Therefore, it is necessary to promote the interlinkage of all chain stages, between producers and traders, and have appropriate business plans and strategies.

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Category: Business, Vietnam

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