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Support to grow

Released at: 15:18, 15/06/2017

Support to grow

Photo: Viet Tuan

There is a great deal Japanese enterprises and organizations can do and are doing to assist Vietnam’s agriculture sector to develop.

by Ngoc Chi

he Daiwa-SSIAM Vietnam Growth Fund II, co-managed by Daiwa Corporate Investment under Japan’s Daiwa Securities Group, last month became a new investor in the Pan Farm JSC, the agriculture arm of Vietnam’s Pan Group. Along with Daiwa, the International Finance Corporation (IFC), a member of the World Bank Group, and SSI Asset Management under Saigon Securities also purchased an 18 per cent stake in Pan Farm. Earlier, DEVNET International, a Japanese organization providing development information, revealed there would be about 3,000 companies, mainly Japanese agricultural cooperatives, established in Vietnam over the next few years. 

Strengthening coordination

Agriculture brings many cooperation opportunities for both Vietnam and Japan given that foreign investment capital in the sector remains limited, according to Mr. Fumiyasu Akegawa, President of DEVNET. “I think it is a good idea to quickly and skillfully combine Japanese companies’ technical ability and information resources with potential markets such as Vietnam to promote the development of agricultural production chains,” he said. 

The model of coordination between Vietnamese and Japanese enterprises in agriculture has borne positive results in recent years. In addition to direct investment, many Japanese enterprises also choose to cooperate with Vietnamese enterprises to establish fruit and vegetable farms around the country. Figures from the Japan External Trade Organization (JETRO) in Vietnam show there are 42 direct investment projects in Vietnam’s agriculture sector. “Most projects are direct investment, but there are also many established under cooperation between enterprises from the two sides,” said Mr. Hironobu Kitagawa, JETRO Hanoi’s Chief Representative. 

Deputy Director of the Ministry of Agriculture and Rural Development’s International Cooperation Department Nguyen Anh Minh told a workshop on opportunities in agriculture and investment cooperation between Vietnam and Japan in February that the number of Vietnamese firms attending the workshop this year increased five-fold compared to last year, which proves that local businesses are very much interested in seeking cooperation opportunities with foreign partners. “Local firms are seizing the opportunity to collaborate with Japanese businesses, learn from their experiences and high-tech farming techniques, develop production bases for material supplies, and secure high-tech farming equipment and agricultural machinery from partners,” he said.

Meanwhile, in order to cement investment opportunities in Vietnam, Mr. Hiroto Okabayashi, Chairman of Japan’s New Gate Co., said he is looking for a partner in Vietnam to invest 500 million JPY ($4.49 million) into energy, machinery and equipment for agricultural production in the country. A representative from Japan’s JC Service Co. said it is also seeking partners in the field of biomass power plant construction, which takes advantage of the inherent strengths in Vietnam’s agriculture sector. 

Most Japanese investors and organizations in Vietnam’s agriculture sector hope to take advantage of the country’s favorable natural conditions, climate, and large consumption market, said Mr. Kitagawa. Japanese businesses, he went on, believe that Vietnam is yet to have a complete cold storage system and form a global food value chain. Increasing value added in agricultural products is also not fully developed. 

While Vietnamese farmers cultivate onions and then sell those onions, he said by way of example, Japanese farmers process their onions to increase added value. Japanese investors therefore expect that Vietnam’s agricultural output will meet that value requirement. Incomes in Vietnam are also gradually improving, which increases demand for safe fruit and vegetables. “I also look forward to Vietnamese enterprises actively inviting cooperation from Japanese partners to create a win-win situation,” he said. 

Cooperation with organizations such as Daiwa and the IFC will help Pan Farm not only regarding capital but also present opportunities for it to expand cooperation with the broad global network of the two, said Pan Group Chairman Nguyen Duy Hung. Pan Farm will expand its production scale and improve corporate governance and financial potential, gradually implementing its strategy to become a leading company in the field of agriculture in Southeast Asia. Mr. Tatsuyuki Ota, Chief Representative of Daiwa Corporate Investment in Vietnam, said that Daiwa will help Pan Farm seek markets and partners in Japan and provide support in technology and experience. 

It’s clear to see that the need among Japanese enterprises to seek business cooperation opportunities in Vietnam is increasing, but for these to work effectively the Vietnamese Government must continue to create a friendly business environment for investors. “A transparent business environment is the key factor attracting foreign businesses,” said Mr. Akegawa. “The exchange rate also is a matter for the government to pay attention to.”

Moreover, it is difficult for foreign enterprises to acquire large parcels of agricultural land at a reasonable price, which makes it difficult to apply advanced technologies, according to Mr. Kakioka Naoki, Senior Representative at JICA Vietnam. “Agriculture contracts have not yet become common practice for farmers in Vietnam,” he said “Contracts are easily breached, which seriously affects the business of foreign enterprises and mutual benefit.” 

Completing value chains

The food value chain was expected to address shortcomings in Vietnam’s agriculture sector, including modest productivity levels and quality and the lack of proper cold storage facilities and a frozen food distribution network. According to Mr. Irie Yasuo, Chairman of Japan’s Tanka Co., which specializes in preserving fruit and vegetables, preservation methods are important for transporting vegetables from Da Lat to Hanoi or Ho Chi Minh City. Tanka therefore wishes to cooperate with Vietnamese companies to apply Japanese methods to increase the effectiveness of storage systems. 

The two governments are also working together on agriculture projects, selecting certain localities in Vietnam to conduct pilot programs addressing specific shortcomings. For example, north-central Nghe An province has received assistance to boost productivity and added value in its farming products. The central highlands province of Lam Dong is being assisted in developing key products and food processing. Outlying districts of Hanoi and Ho Chi Minh City are being helped to improve cold storage and frozen food distribution systems, while Mekong Delta provinces are being aided in adapting their farming to the impacts of climate change.

Compared with other ASEAN countries, Vietnam’s agriculture infrastructure has been well developed. Water and electricity supply and roads, which are the most important factors in the establishment of food value chains, are all in good shape, according to Mr. Naoki, However, he also pointed out that there are many lingering shortcomings, such as unsafe crop production from the incorrect use of pesticides, insufficient post-harvesting, unclassified produce, a lack of safe vegetables in markets at good prices, complex distribution channels, and poor competition, and many other issues. 

In addition, productivity is not high and Vietnamese farmers do not have sufficient knowledge and techniques to improve productivity and produce safe agricultural products. To increase agricultural productivity, the use of machinery is crucial. “Used machinery can still ensure production capacity, but the government has not adopted policies to import such equipment from Japan and facilitate access by farmers,” Mr. Kitagawa said. 

In August 2015, the Vietnamese and Japanese Governments agreed to encourage private sector investment in the agriculture sector in order to establish agriculture food value chains in Vietnam. Many Japanese companies have visited Vietnam seeking opportunities under the agreement. Actual investment in the agriculture sector has only just begun, however, and with JICA’s support is gradually increasing. “We believe Japanese investment can help to not only drive Vietnamese agriculture but also improve hygiene and safety,” Mr. Naoki said.   

“We plan to create an organization to support Vietnamese enterprises to improve the agriculture value chain. In Japan, there is the concept called ‘Rokujisangyo’, which consists of three processes in the agro-product chain: production, processing, and sales. In Vietnam, few enterprises do all three. I hope that ‘Rokujisanyo of Vietnam’ will multiply with ‘Rokujisanyo of Japan’ to create a new value chain called ‘Sanjyoroku-jisanyo’, which is the result of the cooperation between Vietnam and Japan.” 

Mr. Hironobu Kitagawa, Chief Representative, JETRO Hanoi 

“Previously, Japanese ODA, especially JICA’s support to the agriculture sector, was mainly technical transfer in production. Transportation, processing and marketing in the food value chain have been mainly dealt with by the private sector. Under the mid- and long-term vision of both governments, JICA has worked in cooperation with the private sector to approach these three activities and continued to provide technical support in agriculture production. This means that the role of the private sector in agriculture development will become more important and the government is expected to set up a favorable environment for the activities of the private sector in developing food value chains. JICA recognizes that Vietnamese agriculture has developed well but still faces difficulties. It will support the Vietnamese Government to tackle the difficulties in the economy and agriculture development.” 

Mr. Kakioka Naoki, Senior Representative, JICA Vietnam

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