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Vietnam Today

Stepping forward with high-tech

Released at: 09:09, 01/01/2019

Stepping forward with high-tech

Photo: Viet Tuan

Leading Vietnamese enterprises have been sinking major investment into digital transformation given the low level of high-tech agriculture in the country.

by Hong Nhung & Ngoc Lan

The “tycoon” of Vietnam’s automobile industry, the Truong Hai Auto Corporation (Thaco), decided to establish a solid foothold in the country’s agriculture sector through a strategic cooperation with the Hoang Anh Gia Lai Agriculture JSC (HAGL Agrico) announced in August. Thaco will be in charge of restructuring the entire operations at HAGL Agrico based on three solutions: applying high technology in accordance with the development roadmap, IT-based governance on the basis of digitization, and the mechanization of all stages in the agricultural production value chain, with total investment of around $515 million.

Many local agriculture producers are aware that investing in high-tech and digital solutions has become a strategic weapon in competing and increasingly asserting their position in the global agriculture value chain. As Prime Minister Nguyen Xuan Phuc told the signing ceremony for the Thaco-HAGL deal: “Today we are promoting a more fundamental trend in which entrepreneurs with great potential directly contribute capital, technology, and governance to transform agriculture. This trend will create a model for the application of advanced technology in agriculture, shifting investment flows and also calling on big businesses to make major contributions to the development of a high-tech agriculture sector.”

Major players

Along with HAGL, Vingroup, Hoa Phat, Vinamilk, and Geleximco are also among the domestic enterprises to apply high-tech in producing fresh and clean agricultural products. The TH Group plans to invest hundreds of millions of dollars in high-tech agricultural projects nationwide, with a focus on producing fresh milk, organic vegetables, herbs, and fruit. The group is currently developing a $53-million high-tech dairy farm in south-central Phu Yen province while also developing two other dairy farming and fresh milk processing facilities in northern Ha Giang and north-central Thanh Hoa provinces with total investment of $287 million.

Participating in agriculture since 2015, local conglomerate Vingroup, through its subsidiary VinEco, built its first greenhouse system for safe fruit and vegetables applying high-tech on an area of 47 ha with initial investment of over $30 million at Tam Dao in northern Vinh Phuc province. “After just three years, we are operating 14 high-tech farms nationwide with VietGAP certification and on the way to meeting GlobalGAP standards,” said Ms. Vu Tuyet Hang, CEO of VinEco. 

The company has been diversifying its product range and is among the pioneers in applying science and technology in high-tech agriculture in addition to focusing on scale expansion. “We already have initial orders for exports to Europe and been promoting ourselves in other overseas markets,” she added.

Meanwhile, Vinamilk announced in August that it would splash out more than $170 million to develop a 6,000-ha complex of high-tech dairy farms in the Mekong Delta’s Can Tho city under a newly-signed agreement with the Song Hau Farm Corporation. Automated technologies and advanced management systems will be used at the complex to produce creative and high-value products and improve competitiveness in the era of Industry 4.0. Vinamilk hopes to use robotics for cattle feeding and milking in the future.

A major manufacturer and supplier of agricultural products and services, the Loc Troi Group has developed a high-tech project for rice plantation at its raw material zone in the Mekong Delta’s An Giang province, using the “large field” model, which will drive the implementation of high-tech agriculture and attract farmers.

After three years of high-tech rice growing on a total area of more than 1,748 ha, Loc Troi has seen overall costs decrease 7.1 per cent, production costs fall 7.6 per cent, and sale prices rise 8.1 per cent, with revenue increasing 6.8 per cent and profit a significant 31.2 per cent. Pesticide use has also fallen 15 per cent, according to Mr. Duong Van Chin, Chairman of the Group’s Dinh Thanh Agriculture Research Center.

Figures from the Ministry of Agriculture and Rural Development (MARD) reveal that 40 high-tech agricultural firms had been certified in Vietnam by July, including 12 cultivation businesses, 19 seafood companies, and nine livestock breeding enterprises. Vietnam’s agricultural sector has witnessed significant changes over recent years, with a number of large corporations along with small and medium-sized enterprises (SMEs) and startups putting major efforts into high-tech agricultural development.

Support from government

Analysts agree that the impact of Industry 4.0 is being increasingly felt in a host of sectors, in which agriculture promises to benefit the most. In terms of production processes, automation can be used in harvesting, preservation, transportation, and processing, with cloud computing applications used to provide traceability. 

Therefore, in recent years, the government has attached special importance to creating conditions and mechanisms for the development of high-tech agricultural enterprises and zones. Eight high-tech agricultural zones are being developed under Prime Ministerial Decision No. 575/2015/QD-TTg on developing such zones to 2020 with a vision to 2030. They include three in Ho Chi Minh City and southern Binh Duong and south-central Khanh Hoa provinces, which have gone into operation under relatively effective models. An additional zone, the Lam Dong High-tech Agricultural Zone in the central highlands’ province of Lam Dong, is still in various stages of certification, as are another four in Can Tho, northern Thai Nguyen and Quang Ninh provinces, and Thanh Hoa.

According to Decree No. 57/2018/ND-CP from the government, enterprises investing in agriculture can enjoy many incentive mechanisms and policies, in particular support for high-tech applications. The government will support 80 per cent of the funding for implementation, capped at VND300 million ($13,000), for enterprises conducting scientific research, purchasing technology licenses, technology, or scientific research and technological development results to create new products, improve technologies, reduce environmental pollution, and save materials and energy.

Enterprises with high-tech agricultural projects require major investment in machinery and technology in the long term. To support such projects, the government as well as authorities and agencies have also launched financial support programs. 

Last year, the State Bank of Vietnam (SBV) announced a decision on a loan program to encourage the development of high-tech and clean agriculture, with a credit package of VND100 trillion ($4.2 billion) to be implemented by eight commercial banks. The banks will provide short, medium and long-term loans with interest rates 0.5-1.5 per cent lower than the normal per annum rate. 

Minister of Agriculture and Rural Development Nguyen Xuan Cuong told local media in October that it is necessary to attract investment in high-tech agriculture, continue to implement policies to support enterprises to import and transfer high technology, mobilize investment resources from society, and prioritize the allocation of State budget resources to support the implementation of high-tech agricultural programs and schemes. “The application of high-tech in agriculture is a key measure to ensure greater economic efficiency and the sustainable development of the sector in the context of global integration and climate change adaptation,” Minister Cuong said.

Existing obstacles

Despite the many remarkable achievements, Vietnam’s agriculture sector must still address a host of challenges when applying high-tech. The application of high-tech in agriculture is concentrated in some areas, certain products with strengths, and some large enterprises, while labor productivity is still low and production efficiency and farmer incomes have not improved compared with restructuring targets.

The shift in the workforce to “non-agricultural” areas has also created a shortage of high-level workers, limiting opportunities to expand investment during Industry 4.0. 

Mr. Chin from Loc Troi’s Dinh Thanh Agriculture Research Center said that high-tech is a new concept for farmers and persuading them to change their attitudes is problematic. “Small-scale agriculture is common in Vietnam, with individual farmers managing a small plot of land and having their own approach to production,” he said. “When they want to reorganize their production and adopt high-tech methods, we must provide training so they can work with common technical process and produce large volumes of high-quality, safe, and hygienic products for domestic consumption and export.”

At a workshop entitled “Vision and Solutions for Scientific and Technological Application in Sustainable Agriculture Development” held by MARD and the Ministry of Planning and Investment and the Ministry of Science and Technology in August, experts identified the main barriers to attracting investment in the agriculture sector, especially those using science and technology, as being difficulties in land consolidation and land conversion policies. The level of support for agricultural enterprises is also quite low and insufficiently attractive to encourage investors, and does not offer protection for domestic enterprises competing with foreign enterprises. 

According to the Organization for Economic Cooperation and Development (OECD), the level of agricultural support in Vietnam now accounts for only about 7 per cent of the State budget, mainly through extension systems and reducing certain types of fees. In other countries, such as Japan and South Korea, this figure can be up to 55-60 per cent. However, Mr. Chin believes that the main role of the government is to formulate guidelines, mechanisms, and policies and create a legal corridor for enterprises to apply high technology, meaning they have to renew their own technology for international integration.

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