Economy

Lesson 3: Clearly identify the difficulties and limitations of the processing industry.

Thu Huyen - Hoai Thu • July 31, 2024 16:30

Although Nghe An has many potentials and advantages in agricultural development, the results in attracting investment in this sector have not been commensurate. Most agricultural processing businesses are fragmented, small or micro-sized, making it difficult to enhance the value of agricultural products.

Thu Huyen - Hoai Thu
31/07/2024

Over the years, thanks to its potential, advantages, and the efforts and policies to encourage and support investment, the province's agricultural sector has achieved significant results.

With its high-tech, concentrated dairy farming project worth $1.2 billion, TH Group is a pioneering enterprise investing in high-tech agricultural production in Nghe An province. It is one of the large enterprises with strong economic potential, investing in the construction of concentrated raw material areas and large-scale processing plants, playing a leading role in the development of modern agriculture in Nghe An province in recent years.

Ms. Vo Thi Nhung, Deputy Director of the Department of Agriculture and Rural Development, shared: Thanks to the province's efforts, projects with investment capital reaching hundreds of millions of USD have been implemented, bringing a new look and new production mindset, contributing to the formation of a modern, high-quality, large-scale, high-value agriculture. In addition to the industrial-scale dairy farming projects of Vinamilk and TH Group, which produce milk, process purified water and fruit juices, and grow clean vegetables, there have been many more investment projects in forestry, tea, pineapple, orange cultivation, medicinal herbs, and livestock farming...

In addition, some localities have also seen positive developments in attracting investment in agriculture. For example, in Yen Thanh district, a rice-growing area, many businesses such as TH Group, Central Seed Company, Thai Binh Seed Company, Bac Ninh Seed Company, and Nghe An Agricultural Materials Joint Stock Company have been attracted to partner with farmers to build models for producing high-quality rice and rice varieties.

However, in reality, not many businesses invest in agriculture. According to the Department of Planning and Investment, out of a total of 1,828 projects that have received investment approval/certificates, only 114 projects have been in the agricultural sector (accounting for only 6.2%); with a total capital of VND 21,991.2 billion out of VND 492,959.51 billion (4.46%). From 2021 to the present, only 24 projects have been in the agricultural sector out of a total of 373 projects that have received investment approval/certificates (also only accounting for 6.43%); with a total capital of VND 3,591.399 billion out of VND 123,179.585 billion, accounting for less than 3%.

The primary reason businesses are hesitant to invest in agriculture is its high dependence on weather conditions, resulting in significant risks and slow return on investment. Meanwhile, with Nghe An's harsh climate and increasingly severe climate change, agriculture faces constant uncertainty. Not only vegetables and fruits, but businesses cultivating other crops like rubber and tea have also struggled due to droughts and storms.

Sharing his views on the current limitations in attracting investment in the agricultural sector, Mr. Phan Van Tuyen, Chairman of the People's Committee of Yen Thanh district, said: Attracting businesses to invest in agricultural production is difficult because the raw materials for processing are not guaranteed, and there are obstacles related to land procedures. The linkage between businesses and farmers in production and product consumption is still unsustainable; the role of cooperatives in linking and connecting businesses and farmers has not been fully utilized, and many cooperatives have poor capacity. Nghe An is a locality heavily affected by natural disasters, while agricultural insurance still has many shortcomings, which also makes businesses hesitant to invest...

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Nghe An is a locality heavily affected by natural disasters, and the shortcomings in agricultural insurance also make businesses hesitant to invest...

Nghe An is one of the three provinces with the largest rice-growing area among the 31 provinces and cities in the North. Rice production is a priority for the province, with significant investment attraction efforts. Currently, several rice processing and export enterprises operate on an industrial scale, with a total capacity of approximately 250,000-300,000 tons of paddy per year. For example, Nghe An Foodstuff Materials Joint Stock Company has a processing line with a capacity of 10 tons/hour, and it collaborates with farmers to produce and purchase products from 3,000-4,000 hectares of rice per year, under the brand name NA 06. Vinh Hoa Science and Technology Company Limited has a processing line with a capacity of 4 tons/hour, under the brand names AC5 and herbal rice. In addition, there are hundreds of small-scale, household-based rice processing facilities in the province. Rice production for processing within the supply chain accounts for approximately 25-30% of the province's total rice production.

However, Nghe An has not yet made significant breakthroughs, creating high-value goods commensurate with its potential and expectations. The reluctance of businesses to invest in agriculture is also a reason why the agricultural processing industry is weak and underdeveloped. Rice production in Nghe An still mainly serves domestic consumption needs, with little consumption in supermarkets, large distribution systems, and especially exports. This situation means that rice production in Nghe An has not yet yielded high value.

According to Ms. Vo Thi Nhung, Deputy Director of the Department of Agriculture and Rural Development, although Nghe An is increasingly focusing on producing high-quality rice, very little of its rice is sold through high-value distribution channels such as supermarkets and large distribution systems. In particular, there is virtually no rice export, and the value of rice production does not match its potential or expectations. Farmers mainly produce rice for self-sufficiency and to support livestock farming.

The majority of the province's rice cultivation area is still being produced using conventional methods, with very little area adhering to safety standards such as VietGAP and organic farming. The number of rice farmers involved in marketing their produce remains small compared to the total annual rice cultivation area; therefore, farmers often face difficulties in selling their products, primarily relying on traders for purchasing. Furthermore, production still faces many shortcomings. Post-harvest preservation remains challenging, mainly relying on manual methods, sun drying, and readily available household equipment. The percentage of rice dried using proper drying systems is very low, with only a few cooperatives having established post-harvest drying facilities.

In early June, farmers in Nghe An province are busily harvesting their spring rice crop. However, they are worried about preservation in the current weather conditions of little sunshine and much rain. During the spring harvest, some households, after drying their rice, encounter less sunshine, and after bagging or storing it in drums, some of it spoils, rots, or sprouts... This is also a difficult problem for many other localities in the province. Nghe An is located in a key area prone to storms and floods, and is also a major agricultural producing province in the country. The difficulties in preservation are causing a decline in the quality of agricultural products, resulting in significant losses for farmers.

For example, regarding peanuts, although Nghe An has a fairly well-known brand, this product has long been absent from the province's list of top agricultural exports. Currently, there are two cooking oil processing plants in the province: Vinh Oil Plant, which produces and consumes an average of 25,000-26,000 tons per year, and Nghia Dan Vegetable Oil Joint Stock Company's oil pressing plant with a pressing capacity of 1,000 tons per year. The average annual output is only 150-200 tons. In addition, there are businesses that purchase, process, and export peanuts. Sy Thang Private Enterprise in Dien Chau district is considered a leading unit in peanut processing and consumption with a capacity of approximately 7,000 tons per year. However, the product is mainly in the form of semi-processed peanut kernels for export, and the processing and consumption are carried out by local businesses and households.

Regarding tea cultivation, Nghe An is one of the provinces with the largest area and annual production of dried tea in the country. For generations, tea has been closely associated with the people of Nghe An. All 21 districts, cities, and towns in the province cultivate tea, forming large specialized tea-producing areas for processing, such as the Thanh Chuong and Anh Son tea regions. However, currently, the tea production and processing situation is inadequate; many once-thriving tea factories are now covered with tarpaulins; and some private establishments operate haphazardly. This situation is affecting the livelihoods of thousands of households involved in tea cultivation, trading, and processing in the province.

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For generations, tea has been closely associated with the people of Nghe An province. All 21 districts, towns, and cities in the province cultivate tea, forming large-scale specialized tea production areas for processing...

Recently, the cultivation of vegetables and fruits has also developed quite well in some localities. The fruit juice processing industry is centered around Nafoods Factory - Nghe An Food Joint Stock Company, producing passion fruit, gac fruit, and pineapple juice with a capacity of 35,000 tons of fruit per year, linked to passion fruit growing areas in Que Phong district and pineapple growing areas in Yen Thanh and Quynh Luu districts; and Nui Tien Fruit Juice Processing Factory - Nghia Dan with a capacity of 40 tons of fruit per hour. However, the linkages between producers are still sometimes inadequate, leading to contract breaches…

Most agricultural, forestry, and aquatic products have increased in both quantity and value compared to other sectors. However, the competitiveness of these products remains low; goods are mainly semi-processed, raw materials are scattered, some raw materials have to be imported from other provinces, and the uniformity of raw materials is low...

The lack of investment in the processing industry has also led to a very modest growth rate in the total export value of agricultural, forestry, and aquatic products from Nghe An, with only a 2.9% annual growth rate during the 2015-2020 period.

According to the Ministry of Agriculture and Rural Development, by 2030, Vietnam's agricultural, forestry, and fisheries processing industry aims to be among the top 10 in the world, with sufficient processing capacity to meet the demands of agricultural production. The overall level of processing and preservation technology will reach at least average, with key agricultural product sectors achieving advanced and modern levels. Processed products will meet the requirements of the consumer market, possess high competitiveness, ensure quality and food safety, and contribute to increasing the added value and export turnover of Vietnamese agricultural products.

To achieve the above objectives, the Ministry of Agriculture and Rural Development aims to organize production linkages within the agricultural production-processing-consumption value chain to enhance the supply of raw materials for processing, ensuring sufficient quantity and quality, reasonable and stable prices for all products. In particular, it emphasizes developing clusters of agricultural production-processing-consumption linkages in localities and regions with large agricultural output, favorable transportation, labor, and logistics, and the potential to become growth drivers for the entire region. It also focuses on selecting leading enterprises with sufficient capital, science and technology, and market access to lead the value chain and ensure smooth and efficient operation. Innovating and improving policies and mechanisms to create a favorable investment and business environment is considered one of the key solutions...

(To be continued)

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>> Final article: Developing organic agriculture in conjunction with promoting digital transformation