Director of the ministry’s International Co-operation Department, Le Van Minh, said that by late 2006, there were 900 Foreign Direct Investment (FDI) projects in agriculture with total registered capital of US$3.7 billion, accounting for about 10.6 per cent of total FDI investment in the country.

Export turnover for 2001-2006 doubled that of 1991-1995.

Broadening portfolios

In the early 1990s, FDI projects in the sector focused on wood processing and other timber forestry products.

Since 1995, in addition to timber products, foreign investors have increasingly invested in livestock and a wide range of agricultural cultivation including the sugar industry, production of animal feed and forestry, particularly pulp plantations.

"On an average, these foreign invested projects earn about $1 billion each year," said Minh.

Though these foreign invested projects posted high revenues, their contributions to the State budget remained very modest at about $30 million per year. Many projects make use of preferential tax and land rental policies.

But the benefits to Viet Nam were diverse. Foreign investors’ support led to the introduction of advanced technology and high quality seedlings, said Minh, and many foreign-invested projects have become models for Vietnamese farmers to learn from.

Foreign-invested projects have provided jobs for more than 75,000 people, excluding seasonal workers and those who work in the supporting services industry.

"It is encouraging that the number of FDI projects in agriculture increases year on year, but the majority of the investors continue to come from Asia," said Minh.

"Viet Nam hopes to have more investors coming from countries with advanced agricultural sectors like the United States, Canada, Australia and European countries.

Continued reforms

To attract more investors to agriculture, Minh said Viet Nam would continue to reform and develop the legal system to make it more attractive, stable and transparent.

Minh said the ministry was now in the process of developing the sector’s economic policies, which would foster a healthy competitive environment and a level playing field for all.

The ministry had also worked out a list of priorities which include a focus on forest plantations, wood processing and establishment of regions for growing high quality rice, coffee, rubber and tea for export.

Cheap labour costs and a stable political environment and society were comparative advantages that Viet Nam offered investors, said Minh. In addition, the government would soon allow foreign investors to use their land use rights as collateral for bank credits and receive compensation if their lands are reclaimed by the government, Minh said.