PPP investments in agriculture face challenges

After more than six years of implementation, eight public-private partnership (PPP) groups of agriculture have positively contributed to the development of key agricultural products. However, they have still faced many challenges.

Eight PPP groups of agriculture

PPP investments aim to lure more capital in the agricultural sector as well as to respond to the New Vision for Agriculture initiated by the World Economic Forum that sets a goal to increase agricultural productivity, reduce carbon dioxide emissions, and create more jobs by 20 percent in each area. Vietnam established six PPP groups of agriculture in 2009, including coffee, tea, pepper, fisheries, common commodities and vegetables. Based on practical needs, two more groups were formed, including agricultural chemicals and agricultural finance. The groups have contributed to promoting the development of key agricultural products.

Regarding the coffee group, PPP projects have increased productivity by 17 percent and incomes by 14 percent, while significantly reducing greenhouse gas emissions. In addition, these projects have helped train farmers on sustainable production and support the development of national documents that are applied in all coffee growing provinces throughout the country.

Via PPP projects the tea group has built national documents for sustainable tea production and sustainable tea supply chains. As for the vegetable and fruit group, PPP projects have helped increase productivity via activities such as training in planting, economical irrigation and applying new varieties.

A series of activities among the pepper and agricultural chemicals groups have also been organized such as action programs for sustainable development and forums to improve prestige of Vietnamese agricultural products in the world market. While some PPP groups have achieved positive results, the seafood group has not recorded good advance for many reasons, relating to the transfer to new investors as well as the dimmed role of the Ministry of Agriculture and Rural Development’s Directorate of Fisheries. Regarding the group of agricultural finance, despite the connections between businesses and banks, the number of branches in districts and communes has remained limited, leading to high transaction costs.

Multiple difficulties Institute of Policy and Strategy for Agriculture and Rural Development Director Nguyen Do Anh Tuan said that although achieving certain results, the development of PPP agricultural groups has still faced many challenges such as how to promote links between domestic and foreign businesses to expand deployed PPP models.

Pham Thi Hong Hanh from the Secretariat of the Partnership for Sustainable Agriculture in Vietnam (PSAV) said that Vietnam is pursuing a policy of openness to the market, and has participated in the negotiations of 17 free trade agreements. Some 10 agreements are in the process of implementation, while the remainder was approved and is expected to be signed soon. After free trade agreements take effect, there will no longer tariff barriers for export and import businesses. However their products must meet stringent requirements, especially quality that requires adequate investment in the whole chain. It is considered the weakness of agriculture as investment in its sector remains limited. Only 521 projects with foreign investment capital of US$3.6 billion were registered in agriculture by 2015, accounting for 1.3 percent of the country’s total FDI capital.

Experts also see difficulties in insufficient capital for PPP projects, which have mostly used state budgets. In addition, investment projects in agriculture often have low profitability, while the payback period usually lasts long. Therefore, agriculture is less attractive to investors than other sectors.

Two major challenges need to be resolved in the coming time, including expanding PPP models and establishing units to provide advice for investors, Nguyen Do Anh Tuan said.

To help PPP agricultural groups achieve better results, Pham Thi Hong Hanh proposed early deployment of a joint circular guiding the implementation of Decree 15/2015/ND-CP on PPP investments in the agricultural sector.

Minister of Agriculture and Rural Development Nguyen Xuan Cuong said that the ministry would sum up the achievements to improve PPP agricultural groups. Through the deployed PPP models, the ministry will also select standard production processes in order to drive towards high-tech agriculture.

Thanh Ha / ven