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POTENTIALITIES AND OPPORTUNITIES FOR DIRECT INVESTMENT IN VIETNAM’S AGRICULTURE

POTENTIALITIES AND OPPORTUNITIES FOR DIRECT INVESTMENT IN VIETNAM’S AGRICULTURE. Ministry of Agriculture and Rural Development. MAIN CONTENTS. A. Potentialities and Opportunities for Investment Overview Agriculture in Economic Zones Development Orientation of Vietnam’s Agriculture

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POTENTIALITIES AND OPPORTUNITIES FOR DIRECT INVESTMENT IN VIETNAM’S AGRICULTURE

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  1. POTENTIALITIES AND OPPORTUNITIESFOR DIRECT INVESTMENT INVIETNAM’S AGRICULTURE Ministry of Agriculture and Rural Development

  2. MAIN CONTENTS A. Potentialities and Opportunities for Investment • Overview • Agriculture in Economic Zones • Development Orientation of Vietnam’s Agriculture • Commercial Agricultural Product • Direct Investment in Vietnam’s Agriculture • Comparative Advantages • B. Investment Policies • Policies, Orientation • Priority Branches to Attract Investment in Agriculture, Forestry and Fisheries

  3. MAIN CONTENTS A. POTENTIALITIES

  4. 1. Overview • Total Area: 331,690 km2 • Population: 87 millions • Administration System: 63 provinces and cities(Major cities including Hanoi, HCM City, HaiPhong, Da Nang, Can Tho) • GDP Growth Rate: 6.78% (2010) • GDP(2010): USD 104.6 billion;USD 1,200 per capita; • GDP Structure: Agriculture: 20.58%; Industry: 41.09%; Services: 38.33% • Exportation (2010): USD 74.6 billion • Importation (2010): USD 83.2 billion

  5. 2. Economic Zones • Northern Highlands Zone • Red River Delta Zone • North Central Coastal Lowlands Zone • South Central Coastal Lowlands Zone • Central Highlands (Tay Nguyen) Zone • South-Eastern Zone • Mekong Delta Zone

  6. 3. Development Orientation of Agriculture, Forestry and Aquaculture Farm-ing • Method of producing rice to be a key export article and ensuring the food security • Method of crop items with high competitive and effective items to serve domestic as well as export market • Method of rationalization for the crop plants with medium and low competitive advantages to replace the importation Breed-ing • Method of hog and poultry breeding to satisfy the domestic needs with the type of centralized farm, far from residential zone, connect the material zones and the processing factory, with the hygienic slaughter and processing the cattle and poultry • Method of cattle breeding with high quality in some advantage zones to satisfy part of domestic needs

  7. 3. Development Orientation of Agriculture, Forestry and Aquaculture Aqua-culture • Rearing: promoting rearing; investment deepening, improving from advanced extensive cultivation, extending half intensive cultivation scale; stabilizing rearing area on freshwater, brackish water; stepping up rearing on sea water and island • Exploiting and protecting source of aquaculture: method of off-shore & oceangoing fishing; enhancing logistic services on sea island Fores-try • Developing 3 types of forest including production forest, protection forest and special use forest in accordance with reasonable planning • Renewing method of management, protection, development and using forest

  8. 5. FDI in Vietnam’s Agriculture, Forestry and Fisheries(1998 - 2009) • In early 90’s, FDI mainly focused on projects of processing woods and forest products • From 1995 up to now, FDI has directed to invest in rearing and processing agricultural, forestry and aquaculture products; producing cane sugar; producing pet food; breeding cattle and poultry; afforesting and producing paper; cold storage, logistic services, transportation; etc.

  9. 5. FDI in Vietnam’s Agriculture, Forestry and Fisheries(1998 - 2009) • Since 2010, Vietnam has given new criteria for sectors classification; therefore, FDI processing projects of agricultural, forest & aquaculture products combined with other FDI processing projects • Following the new classification, the numbers of FDI projects of agriculture decreased. Until May 2011, the numbers are 481 projects with the total capital of USD 3,1 billion

  10. 5.1. FDI Status - Agriculture rearing and processing • 279 FDI projects with total registered capital of over USD 1,7 billion, occupying 37% of total registered capital of the entire branch; total paid-in capital reached over USD 1 billion, occupying 51% of total paid-in capital of the entire branch • Key investors: Taiwan (92 projects), Singapore (15 projects), USA (13 projects), France (7 projects), etc.

  11. 5.2. FDI Status - Aquaculture • 139 FDI projects with total registered capital of over USD 357 million, occupying 7% of total registered capital of the entire branch; total paid-in capital reached over USD 181 million, occupying 9% of total paid-in capital of the entire branch • Key investors: Taiwan (33 projects), Korea (24 projects), Japan (11 projects), etc.

  12. 5.3. FDI Status - Breeding and processing • More than 80 FDI projects with total registered capital of over USD 753 million and total paid-in capital reached over USD 340 million • Key investors: Taiwan (13 projects), Thailand (9 projects), France (8 projects), etc.

  13. 5.4. FDI Status - Forestry • 441 FDI projects with total registered capital of over USD 1,6 billion, occupying 35% of total registered capital of the entire branch; total paid-in capital reached over USD 353 million, occupying 17% of total paid-in capital of the entire branch • Key investors: Taiwan (192 projects), Japan (29 projects), British Virgin Island (27 projects), Malaysia (26 projects), etc.

  14. 5.5. FDI Structure in Agriculture (1998-2009)

  15. 6. Comparative Advantages of Investment in Vietnam’s Agriculture • Comparative Advantages depending on the diversity and variety of natural resources • Comparative Advantages depending on the abundance, diligence and skillfulness of human resources • Comparative Advantages depending on the infrastructure which has been focused on developing and synchronically constructing • Advantages of the stable politics and economy, open investment environment

  16. 6.1. Comparative Advantages - Geographical Features

  17. 6.2. Comparative Advantages - Human Resources • Population: 87 million people; young population; the number of labour-aged population occupied 60% • Diligent, hard-working • Lower labour cost than that of other countries in the area and the world • Skillful, be always trained and improved the level • The number of labours with high level in society is increasing, which estimating 1 million labours/year

  18. 6.3. Comparative Advantages - Focus on Infrastructure • Government’s prior to invest and construct • The systems of highway, waterway, railway and airline are developing synchronically to the hinterland, creating convenience for the process of transhipment and circulation around the country • The systems of post office are increasing • There are many transnational highway lines • Focus on constructing centralized industrial zones, hi-tech agriculture • Develop infrastructure systems for agriculture, such as: irrigation, electricity, transportation, living water, cultural works, etc.

  19. MAIN CONTENTS B. POLICIES OF INVESTMENT PROMOTION AND ATTRACTION • Advantages in Polices, Laws and Other Principles • List of Agricultural Branches which are Prior Attraction

  20. Advantages in Polices • Legal Bases • Investment Law (2005); • Enterprise Law (2005); • Decree No. 108/2006/ND-CP, in which Agriculture, Forestry and Fisheries are entitled to special investment preferences and investment preferences (Lists A and B); • Decree No. 102/2010/ND-CP on guiding the implementation of a number of articles of the Enterprise Law; • Decree No. 124/2008/ND-CP on detailing and guiding the implementation of a number of articles of the Law on Enterprise Income Tax; • Decree No. 87/2010/ND-CP on detailing the implementation of a number of articles of the Law on Import Duty and Export Duty; • Decree No. 142/2005/ND-CP on collection of land rents and water surface rents; • Resolution No. 13/NQ-CP of April 7, 2009 on orientations and solutions to attract and manage foreign direct investment in the coming time; • Other legal documents related to tax, credit, land, etc.

  21. Advantages in Polices • Investors having investment projects in Vietnam’s territory are entitled to investment preferences in domains or geographical areas. • Agriculture, Forestry and Fisheries are entitled to special investment preferences (“List A”) and investment preferences (“List B”). • The list of geographical areas facing extremely difficult socio-economic conditions which are entitled to investment preferences (“Area 1”). • The list of geographical areas with difficult socio-economic conditions which are entitled to investment preferences (“Area 2”). • Investment projects entitled to special investment preferences are eligible for investment preferences like investment projects located in geographical areas with extremely difficult socio-economic conditions.

  22. Advantages in Polices Incentive policies for enterprise to invest in agriculture in accordance with the Decree No. 61/2010/ND-CP of June 04, 2010

  23. Investment Preferences in Agriculture • Preferences in Tax Rate of Enterprise Income Tax: Decree No. 124/2008/ND-CP of December 11, 2011 • Tax-exempt incomes from the provision of technical services directly for agriculture include income from such services as irrigation and water drainage; soil ploughing and harrowing, and dredging of intra-field canals and ditches; prevention and control of crop and animal pests and diseases; and harvest of agricultural products. • The incentive tax rate of 10% for 15 years is applicable to new enterprises established under investment projects in geographical areas with extreme socio-economic difficulties, economic zones or hi-tech parks under the Prime Minister’s decisions. • The incentive tax rate of 20% for 10 years is applicable to new enterprises established under investment projects in geographical areas with socio-economic difficulties. • The incentive tax rate of 20% is applicable to agricultural service cooperatives and peoples credit funds throughout their operation duration. • Tax exemption for 4 years and 50% reduction of payable tax amounts for 9 subsequent years are applicable to: New enterprises operating in socialized domains in geographical areas with socio-economic difficulties or extreme socio-economic difficulties. • Tax exemption for 4 years and 50% reduction of payable tax amounts for 5 subsequent years are applicable to new enterprises operating in socialized domains in geographical areas outside the list of those with socio-economic difficulties or extreme socio-economic difficulties.

  24. Investment Preferences in Agriculture • Import Duty Exemption: Decree No. 87/2010/ND-CP on detailing the implementation of a number of articles of the Law on Import Duty and Export Duty • Plant varieties and animal breeds permitted to be imported for the execution of investment projects in the sectors of agriculture, forestry and fisheries. • Goods imported to create fixed assets of investment projects in domains entitled to import duty preferences to implement projects of Rearing and processing of agricultural, forest and fisheries products; salt making; production of new artificial breeds and plant varieties and livestock breeds; Using of high technologies and modern techniques, protection of eco-environment; hi -tech research, development and nursery; Investment in the building and development of infrastructure facilities in hi-tech parks and economic zones and other important projects decided by the Prime Minister, etc. • Raw materials and supplies which cannot be domestically produced yet. to be used for manufacturing equipment and machinery included in technological lines or for manufacturing components, details, knocked down parts, spare parts, fittings, molds and accessories accompanying equipment and machinery stated at Point a of this Clause for assembly into complete units.

  25. Investment Preferences in Agriculture • Non-taxable Objects : Law on Value-Added Tax, a number of agricultural, forestry, aquaculture products and services for agriculture which are non-taxable • Cultivation and husbandry products, and reared and fished aquatic products which have not yet been processed into other products or have been just preliminarily processed and sold by producing and fishing organizations and individuals, and products at the stage of importation. • Products which are animal breeds and plant varieties, including breeding eggs, breeding animals, seedlings, seeds, sperms, embryos and genetic materials. • Irrigation and drainage; soil ploughing and harrowing; dredging of intra-field canals and ditches for agricultural production; services of harvesting farm produce. • Salt products made of seawater, natural rock salt, refined salt and iodized salt.

  26. Investment Preferences in Agriculture • Credit Preferences of the State: Decree No. 151/2006/ND-CP of December 20, 2006 on the State's investment credit and export credit, and Decree No. 106/2008/ NĐ-CP of September 19, 2008 on amending and supplementing a number of articles of the Decree No. 151/2006/ND-CP related to projects in agriculture and rural areas (regardless of geographical areas); besides, in accordance with the Decree No. 41/2010/ND-CP on credit policies for agricultural and rural development • The loan capital level for a project shall be at most equal to 70% of the total investment capital level of that project and shall be decided by the Vietnam Development Bank. • The lending term shall be determined based on the capital recovery capability of a project and the loan-repayment capability of the investor may be 12 years at most; and for some particular projects, the lending term may be 15 years at most. • The lending interest rate shall be determined at the time of signing a credit contract for the first time and shall be kept unchanged throughout the lending term.

  27. Investment Preferences in Agriculture • Preferences in using land: Decree No. 151/2006/ND-CP of November 14, 2005 on collection of land rents and water surface rents • Land rents and water surface rents shall be exempted from 3 – 15 years depending on detailed investment project. • Investment projects in the domains where investment is specially encouraged, which are executed in geographical areas facing exceptional socio-economic difficulties.

  28. Investment Preferences in Agriculture • Other preferences investment support: • Tax preferences for export items; • Support policies for farm; • Tax policies for agriculture; • New policies on pilot agricultural insurance, building new rural areas; • Policies on agricultural, forestry, fisheries incentives, etc.

  29. International Commitment • Vietnam’s International Commitment related to agriculture, forestry and fisheries for the purpose of FDI liberalization in agriculture, forestry and fisheries • Commitment on investment policies in agriculture, forestry and fisheries: Commit to cancel the requirement of obligatory developing the domestic material sources for the projects of producing cane sugar, vegetable oil, milk, wood, etc. • Commitment on tariff and non-tariff measures in agriculture, forestry and fisheries: • Commitment to WTO. • Commitment to TIFA. • Commitment to other free trade areas, bilateral and multilateral investment, such as: ASEAN (AFTA, AIA), ASEAN - China, ASEAN - Korea, ASEAN - Japan, ASEAN – Australia -New Zealand, ASEAN - India, Vietnam - Japan (EPA). • Commitment on route of opening distribution services: Investors are allowed to invest, establish retail bases, distribute, not distribute (rice, sugar, tobacco) or distribute following the Vietnam’s route of opening (fertilizer, etc.)

  30. Investment Support • Support on technology transfer; • Support on training; • Support on investment in developing investment services; • Support on investment in constructing infrastructures outside the fences of processing zones, hi-tech parks; • Support on investment in constructing infrastructures inside the fences of processing zones, hi-tech zones; • Support on investment in developing infrastructure systems in economic zones, hi-tech parks.

  31. Investment Type • Direct Investment • Establishment of economic organization with 100% of capital of domestic investors or 100% of capital of foreign investors. • Establishment of joint-venture economic organization between domestic investors and foreign investors. • Investment by contract such as: Business Cooperation Contract (BCC), BOT Contract, BTO Contract, BT Contract. • Investment in developing business. • Stock purchase of capital contribution to take part in the management of investment activities • Investment in combination and acquisition enterprises. • Other direct investment types • Indirect Investment • Purchase of stocks, shares, bonds and other value papers. • Approval of stock investment fund, and other intermediate financial institutions • Investment Activities through buying, selling stocks, shares, bonds and other value papers of organizations, individuals and procedures of implementing indirect investment activities in accordance with the laws on stock and other relevant laws

  32. Investment Type • Public - private Partners (“PPP”) who are incentive • Ministry of Agriculture and Rural Development (“MARD”) together with 12 international groups related to agriculture established the Agricultural PPP Association after International Economic Forum. • The Agricultural PPP Association founded 5 groups to bear specially responsibility of branches including: Coffees, teas, aquaculture products and other agricultural products.

  33. Agencies of Policies Approval, Investment Registration and Project Documents Acceptance • Prime Minister: Special projects regardless of capital resource and investment scale; projects with capital resource of over VND 1,500 billion; • People’s Committees of Provinces, cities which the projects located; • Management boars of processing zones, industrial zones, hi-tech parks; agencies of issuing investment license.

  34. Investment Approval and Verification

  35. Policies of Investment Attraction in Agriculture • Combine producing and processing, consuming, export focusing: crops, animal pets, afforesting, aquaculture products; • Hi-tech projects less using natural resources, being eco-friendly, increasing labour efficiency and investing in higher value added phrases; • Bio-technological projects, hi-tech agricultural projects; • Infrastructures for agriculture; • Agricultural materials, such as: agricultural machines, fertilizers, chemicals; • Industrial processing; maintenance after harvesting; • Logistic services for agriculture, forestry and aquaculture; • Combine FDI enterprises and domestic enterprises.

  36. VIETNAM, STRATEGIC DESTINATIONFOR INVESTORS

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