Vietnam: CPTPP pressures to force agricultural reforms
Due to the poor competitiveness of Vietnamese agricultural and livestock products, agriculture will be significantly impacted by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, it will also be a driving force for the institutional reform of Vietnamese agriculture.
Attracting more investment to agriculture
Domestic and foreign investment has started flowing dramatically into agriculture, the sector which is supposed to face great competition from imported goods, as the CPTPP comes into effect.
According to the Report on the Impacts of the CPTPP on Vietnam, pork and chicken might be at a disadvantage against imported products.
However, Deputy Prime Minister cum Minister of Foreign Affairs Pham Binh Minh stated that the situation would not be too serious since Vietnam is able to postpone the import tax reductions on these products for quite a long time, as the delay time is more than 10 years for several varieties of poultry products. This period will be a chance for investment to improve these sectors and restructure agriculture to adapt to global competition.
The Ministry of Agriculture and Rural Development showed that in the past three years, the number of enterprises investing in the agricultural sector has tripled, and is now there are three times as many enterprises as co-operatives. In 2018 alone, more than VND10 trillion ($429.2 million) has been poured into agriculture.
When the CPTPP takes effect, Vietnam will have the opportunity to attract capital from markets which rarely or have never invested in Vietnam.
Under such circumstances, more and more export manufacturers, such as meat, vegetable, and fruit processing plants and breeding projects following the value chain model,have been growing like mushrooms after the rain.
Koyu & Unitek Company Limited, a joint-venture enterprise between Australia and Japan located in Long Binh Industrial Zone, Dong Nai province, has decided to build another factory with the monthly capacity of 550 tonnes to respond to the high demand for poultry in foreign markets.
Similarly, C.P Vietnam Livestock Corporation has invested in a poultry processing project for export production, a closed complex of feed mill, breeding stock farm, broiler chicken farm, slaughter plant, and processing plant. The capital value of the first stage is estimated at $250 million, while the estimated annual capacity of the plant will be 50 million chickens.
In addition, there are five vegetable and fruit processing plants worth millions of dollars currently under construction. As scheduled, the vegetable and fruit process plant in Tay Ninh province, invested by Lavifood Joint Stock Company with the investment capital of VND1.8 trillion ($77.3 million), will be put into operation this November.
Large-scale production to strengthen competitiveness
Giving his opinion about the ratification of the CPTPP, Nguyen Viet Dung, a deputy from Ho Chi Minh City, said that agriculture needs further investment due to the increasing competitiveness of agricultural products from other signatories to the agreement.
“Advanced technology is now globally available, and Vietnamese enterprises are able to make purchases and the technology will be transferred. What Vietnam needs to establish is large-scale agricultural production,” he emphasised.
Being aware of the competition breaking out when the CPTPP takes effect, Lavifood’s current strategy is to focus on million-dollar projects, as well as closed-loop manufacturing to inflate export value.
Analysing the opportunity for Vietnamese vegetable and fruit exports, general director of Lavifood Pham Ngo Quoc Thang said that a breakthrough is within reach if the country invests in larger-scale and more professional manufacturing.
Therefore, besides the two factories in Long An and Tay Ninh, Lavifood has been co-operating with Korean-based ILMI Agriculture & Fisheries Company Limited at its vegetable and fruit processing factory in Hai Duong province’s VSIP. The factory has an annual capacity of 15,000 tonnes and a total investment capital of VND1.5 trillion ($65.2 million).
Regarding livestock products, especially pork, the pressure is forecast to rise significantly once the CPTPP takes effect, yet it is an ideal opportunity for enterprises to create value-chain-based production, including pork processing and exporting.
For instance, Bien Dong DHS Limited Liability Company has just inaugurated the largest complex in the Southern region for pork production and processing, with the intention of developing green husbandry practices, providing organic, safe pork with traceable origin.
Obviously, the Vietnamese agriculture is going to face piles of difficulties when the CPTPP comes into effect, however, restructuring and building out larger-scale production chains could enhance its competitiveness, as can be seen in the number of projects and export revenue figures.
By The Hai / Vietnam Investment Review