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Parceled together

Released at: 08:00, 20/05/2017

Parceled together

Photo: Viet Tuan

The small size of land plots in Vietnam has long curtailed investment in agriculture but a new pilot project is set to change that.

by Ngọc Chi

Located about 60 km south of Hanoi, Nhan Khang commune in Ly Nhan district, Ha Nam province, is surrounded by green plots of fruit and vegetables with well-planned irrigation and cultivation systems. The commune has been chosen to pilot an agricultural land accumulation policy over recent years, and at the end of last year the Ha Nam High-tech Agricultural Development and Investment JSC kicked off construction of its high-tech agricultural production area based on the agricultural land accumulation model. 

The land accumulation model has three different types: farmers gathering their land together and planting the same crops with the same inputs (like fertilizers), enterprises negotiating with each farming household individually to buy or lease their land, and local authorities leasing land from farmers and then sub-leasing the land to enterprises. Ha Nam High-tech Agriculture Development and Investment sub-leased land from local authorities and guarantees employment for the farmers the land was originally leased from. 

Ms. Tran Kim Lien, Chairwoman and CEO of the Vietnam National Seed Joint Stock Company (Vinaseed) and also CEO of Ha Nam High-tech Agricultural Development and Investment, said that the most important thing about this model is that it changes old production habits and involves local farmers in the process of land accumulation. “The technology must be extended so that farmers can join the chain,” she said. “More than 200 farmers in Nhan Khang will be trained to become professional farmers on their own fields.”

Welcome news 

Ha Nam is one of the first provinces to successfully implement the land accumulation model for large-scale and hi-tech agricultural development. After three years of applying the model, the province secured over 400 ha of agricultural land from farming households in Binh Luc and Ly Nhan districts, which attracted major groups such as Vingroup and Vinaseed as sub-lessors. 

Prime Minister Nguyen Xuan Phuc recently tasked the Ministry of Natural Resources and Environment with quickly identifying solutions to address the limitations inherent in agricultural land ownership to boost land accumulation for large-scale farming and production in the third quarter of this year. This follows a request from the National Assembly (NA) to amend the 2013 Land Law in order to lift land limits. It was good news for domestic and foreign investors involved in Vietnam’s agricultural sector.

Article 129 of the 2013 Land Law allows each household in the Mekong Delta and southeast provinces a maximum of 3 ha for each type of farming - growing trees, raising aquatic animals, processing salt - with a total of 9 ha for each household. In other areas of the country, these land plots are limited to 2 ha for each type. 

Scattered, small-sized land lots have hindered local people and enterprises from making long-term investments in agriculture, according to Deputy Minister of Agriculture and Rural Development Le Quoc Doanh. “Ninety-six per cent of agricultural land has been assigned to households, which resulted in land being scattered and large-scale production difficult,” he said. 

Land is said to be one of the greatest obstacles facing investors in Vietnam’s agriculture sector, which is one reason why foreign investment inflows remain modest. According to the Foreign Investment Agency at the Ministry of Planning and Investment, although 2016 was an impressive breakthrough year for the agriculture sector, foreign direct investment (FDI) into the sector fell short of expectations. The country attracted nearly 550 agriculture FDI projects, including agriculture, forestry and fishery, in the first eleven months of 2016, with total capital of nearly $4 billion, representing just 1.2 per cent of total investment. Average capital per project stood at about $6.7 million. 

Though recognizing the development potential of Vietnam’s agriculture sector, Mr. Hiroshi Chishima, Deputy Chief Representative at the Japan External Trade Organization (JETRO), said that many Japanese investors do not pour money into the sector because of difficulties in policies, especially land. He emphasized that in order to attract more foreign investment, Vietnam needs to address land issues and accelerate the implementation of administrative procedure reform.

In order to encourage land accumulation for large-scale agricultural development, it is necessary to revise the 2013 Land Law by removing or loosening quotas on agricultural land, according to Deputy Minister Doanh. “The household economy, with scattered and small land lots, no longer meets the need to develop agriculture on a large scale,” he said. “Promoting land accumulation and applying advanced technology on large-scale farms would improve the capacity, quality and competitiveness of the agriculture sector in particular and Vietnam’s economy in general.” 

Mixed opinions

Consideration being given to relaxing limits on individual farmland holdings to boost land accumulation has been largely welcomed by experts despite some misgivings about the social impacts. Agreeing with the policy, former Deputy Minister of Natural Resources and Environment Dang Hung Vo told the recent Spring Conference on Agriculture 2017 in Hanoi that agricultural land limits have been lifted in developed countries, where farmers were provided favorable conditions to stabilize production and make long-term investments, and he advised Vietnam to do likewise as soon as possible.

Mr. Le Duc Thinh, Deputy Director of the Department of Economic Cooperation and Rural Development at the Ministry of Agriculture and Rural Development, gave an overview to those in attendance of the government’s efforts to improve agriculture. One of the most positive changes, he said, was that the government has begun prioritizing quality of produce over maximizing output, which was evidenced by the development of quality standards and sets of good practices. Nevertheless, he also pointed out numerous institutional flaws that hinder the development of agriculture, the most pressing being what he called a wrong attitude towards agricultural land. “Currently, agricultural land is priced at just one-tenth of the market price, and farmer-owners of these lands are unable to capitalize on their sole property, losing hundreds of billions of dong,” he explained. 

Deputy Prime Minister Trinh Dinh Dung, meanwhile, addressed a conference on boosting land accumulation held in northern Vinh Phuc province on April 14, where he noted that it is necessary to carefully study the impact of land accumulation on society, agriculture, and the environment, especially the relaxation of land limits, to ensure the benefits of the State and of farmers. He urged those present to identify solutions to the conflict between land accumulation and the stability of local livelihoods and to also study effective land accumulation models.

Pioneering groups

While opinions are mixed, the land accumulation experiment in Ha Nam province has seen positive results. Investors are coordinating with authorities to renovate infrastructure such as canals and roads and to build greenhouses to prepare for the deployment of high-tech agriculture. Farming households that have handed over their land to the province are employed by the new owner on average monthly salaries of about VND3 million ($130) to VND4 million ($175). 

Local farmers not only earn income from land rentals but also receive vocational training. “Under the high-tech agricultural model, we expect sales to reach VND3 billion ($132,000) per hectare in 2017,” said Ms. Lien from Ha Nam High-tech Agricultural Development and Investment. “This is certainly a good sign for the agriculture sector in Ha Nam province and a new milestone in the development of high-tech agriculture.” 

Ms. Thai Huong, Chairwoman of the TH Group, recently made a bold claim: “If I had enough land, the central highlands would witness tremendous change within three years.” It was no idle boast, given her efforts in the north-central province of Nghe An to establish a successful and large-scale dairy farm. She added, though, that it was not all smooth sailing. Unlike industrial projects, in order to carry out agricultural projects, businesses and local governments have to work very hard to convince farmers and households to lease their land. “It was a tiring, time-consuming, expensive process, and required the business to be really persuasive,” she was quoted as saying. 

Vingroup, meanwhile, had to negotiate with over 3,000 households to get hold of just 140 ha of alluvial land in northern Nam Dinh province to establish a farm producing clean vegetables. Not all of them said yes, however, so the local government had to do a lot of “rearranging” to meet the company’s demand for large, connected, uninterrupted land areas. 

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