A worker feeds milch cow in a farm of the TH Group. The agricultural sector will focus more on the domestic market rather than exports. — Photo Courtesy of the TH Group

HCM CITY (Biz Hub) — Local companies in the agricultural sector should begin to focus more on the domestic market rather than exports to prepare for competition when the Trans-Pacific Partnership (TPP) takes effect, experts have said.

Duong Ngoc Minh, chairman and general director of Hung Vuong Joint Stock Company, said the country was moving from small-scale to large-scale production and that the husbandry industry would continue to develop in the next 10 years.

Foreign companies have invested in more than 10 animal feed production plants, particularly for pigs. Viet Nam, which has the fourth highest number of pigs in the world, is expected to rise to third in the near future.

Speaking at a forum on agriculture held recently in HCM City, Minh said that local companies were not preparing to take advantage of this opportunity.

Challenges

TPP is expected to come into effect at the end of 2017, and with it, there will be opportunities and challenges.

In the agricultural sector, for example, more Vietnamese products will be exported to the US and Japan as tariffs will be cut, some to zero. More foreign direct investment will flow into the sector.

However, there are concerns that domestic companies will not thrive in the more competitive climate because of their lack of use of high technology in agricultural production, small scale, low levels of investment or failure to meet international standards.

Ngo Minh Hai, vice president of the TH Group, which produces TH True Milk, said: "The sector will suffer more disadvantages than advantages.

"For instance, in the area of dairy farming, the US, Australia and New Zealand all have strong dairy farm industries and will be major competitors.

"Not only do their products meet high standards on food safety and hygiene, but their financial sources are plentiful and their technologies are advanced," Hai said.

"The standards of Viet Nam products are not clear," he said, adding that the Government should create a legal framework for agricultural development.

Vo Truong Son, CEO of Hoang Anh Gia Lai Group, which has investment projects in agriculture such as sugarcane, corn, palm oil and dairy farming, said dairy farms in Viet Nam were small while farms in the US, Australia and New Zealand comprised thousands or dozens of thousands of hectares.

"These large areas are suited to grazing, which helps to cut costs," he said.

Son said the company had invested in Cambodia so that it could have large areas for mechanized and automatic dairy farming.

Infrastructure for transport in Viet Nam, especially in mountainous areas, had also not been effective for agricultural development.

"Transport fees in the country are very high," he said.

He said the Ministry of Agriculture and Rural Development should co-operate with the Ministry of Transport to develop main transport routes and railways to improve competition.

Son said that developing the domestic market would be key to dealing with future competitors.

Global value chains

Dr Tran Tien Khai of HCM City University of Economics, an expert in agriculture, said that local companies must enter global value chains.

"This is vital for the country's farmers," Khai said.

Nguyen Do Anh Tuan of the Institute of Policy and Strategy for Agriculture and Rural Development said that many farmers did not understand the market and lacked information.

Enteprises could help farmers by providing information about market and finance as well as technology, and the right kind of products to sell in the market, Tuan said.

Taking part in a global value chain would help build a brand name in the market.

Vu Van Tam, deputy minister of Agricultural and Rural Development, said that business investment in the domestic agricultural sector made up only one per cent of total investment in the country.

"Foreign investment in agriculture is very low, with 3.1 per cent of projects and 1.46 per cent of the total registered capital," Tam said.

The forum was held by the Federation of Agriculture and Rural Development in co-operation with CAFEF (www.cafef.vn), the Financial Information Channel. —VNS