31 May 2019
What is the future for the food and agricultural industry in Vietnam?
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Anchovies drying for fish sauce production in Mui Ne, Vietnam

Vietnam’s agricultural sector has recently posted a stunning trade surplus of $1 billion in 2 months. This is great in itself, but surprising to most who are aware of the ups and downs of Vietnamese economy – over the last few years the industry has been experiencing a 1.6 per cent fall in export value. In fact, when you look at the overall picture concerning growth and recession, it is very much a mixed bag, but there are definitely green shoots to get excited about.

Seafood is a market for the future

While there has been a fall in the value of farm produce and animal husbandry, there has been a startling growth in seafood and forest products. Export growth for seafood has increased by 4.44% and forest products export growth has increased by 12.8%1

The seafood export market is doing remarkably well. The Department of Farm Product Processing and Market Development has released statistics which show that the top four export markets for Vietnam’s products in this sector during this period were Japan, the US, China and South Korea. At 53%, this accounted for over half of the total export value. There was also good news for shrimp fishers and exporters. On January 14th 2019, new and very favourable tariffs were laid down by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). These benefits have led to a long-term drive to enhance profits from shrimp fishing by streamlining the approach to a major target market (Japan) and developing product quality.

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Food production. Conveyor line for shrimp processing.

Fruit and vegetables remain a major export for Vietnam

The fruit and vegetable market has seen mixed results.  While the export turnover of fruits and vegetables has been consistently falling over the last few years, there has been strong growth in South Korea, the Netherlands, Australia and the United Emirates in this sector.

However, the great boost for Vietnam’s agricultural and food industry has been in its relations with the US. In February 2019, America allowed the imports of fresh mangoes from Vietnam. This adds to the other five fruits which are already being exported: dragon fruit; rambutan; lychee; star apple and longan. After a growth of over 37% in this sector in 2018 the future looks very healthy with the new addition to exports.

The food processing industry benefits from investment

It is estimated that Vietnam can be considered one of the top 15 largest agricultural exporters. There is no shortage of raw materials. The food processing industry in Vietnam adds value to the raw products through robust investment.

The food processing industry has seen vast development all round over recent years. The industry is successful both in the export trade and the home market. High economic growth has attracted both domestic and foreign investment while free trade agreements have also bolstered stability.

Also, development in the sector has been made financially viable from another more unexpected factor:  the government has introduced a law whereby technology related to food production chains are tax exempt. The government is offering this highly attractive benefit to businesses in Vietnam because past growth has been so powerful. Consequently, the food processing industry is now a major player in Vietnam’s economic development strategy (Towards Prosperity, Creativity, Equity and Democracy Vision) which is phased up until 2035.

Investment in the industry from home and abroad has led to the construction of one of the most modern fruit and vegetable processing plants in the Asia-Pacific region. The goal is for the plant to produce frozen fruits, soft dried fruits and fruit concentrates and export them to the US, the EU, South Korea and Australia.

For continued growth experts feel there is a need for (1) local firms to invest more in deep processing to add more value to the products, (2) production technologies need to be enhanced and (3) there needs to be a more effective network of groups and businesses to streamline the supply chain in Vietnam.

It is also an important point that the food processing industry is not just seeing growth in the export market alone. At home, in Vietnam, domestic trade looks very healthy and demand is high. Experts believe this is fundamentally due to the rise in annual incomes which has subsequently triggered contemporary trends where affordable ready-to-eat meals are highly popular.

 

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1https://english.vietnamnet.vn/fms/business/220177/vietnam-s-agricultural-sector-posts-trade-surplus-of–1b-in-two-months.html