Since over 70 per cent of population are farmers, agriculture and farmers livelihoods are special concerns to the Party and State resulting in annual high levels of capital investment for construction and upgrading of infrastructure.

The capital comes from many sources: the government budget, ODA, and government bonds. In 2007, total capital investment for agriculture will be VND5.42 trillion, however only VND2 trillion has so far been allocated this year, accounting for only 40 per cent of the budget.

"The rate of capital use is quite low even though infrastructure for the development of agriculture production needs strengthening in both quantity and quality," said leaders of the Ministry of Agriculture and Rural Development and Ministry of Finance.

The largest proportion of capital investment is for irrigation projects, however, a large amount of capital has not yet been spent. While irrigation projects will amount to 70 per cent of the total planned budget for 2007, only 30 per cent of this has been used so far in the first half of the year.

Approximately 20 per cent of the capital mobilised from government bonds has been allocated. Irrigation projects (particularly reservoirs) have become the "backbone" of agricultural production in both rainy and dry seasons and crucially during droughts.

In many parts of the country, especially in mountainous and central areas, the system of irrigation projects is under financed and in poor condition causing many problems for farmers during floods and droughts. Over recent years only 40 per cent of capital allocated has ever been spent on irrigation projects.

Generally, capital spending in agriculture, compared to the industrial and service sectors, remains low. In 2007, VND5.5 trillion was allocated to basic construction and agricultural production, much less than investments in industry.

Currently, there is both a serious lack of capital and a "surplus" of investment due to the unallocated funds. The most important reasons for the slow process of construction are the slow clearance of land, the poor capacity of some investors and cumbersome administrative procedures.

The Ministry of Agriculture and Rural Development, actively co-operating with local authorities and relevant sectors, has published many solutions, with the aim of increasing the rate of capital use and strengthening the processes of construction.