Vietnam to be a key player in global agriculture: HSBC exec

By Surajit Rakshit
Thu, March 21, 2024 | 10:06 pm GMT+7

The World Economic Forum (WEF) last year selected Vietnam as one of the first three countries to pilot the Food Innovation Hub, a flagship initiative of the Food Action Alliance designed to improve sustainability in food production, writes Surajit Rakshit, country head of global trade and receivables finance, HSBC Vietnam.

 Surajit Rakshit, country head of global trade and receivables finance, HSBC Vietnam. Photo courtesy of HSBC.

Surajit Rakshit, country head of global trade and receivables finance, HSBC Vietnam. Photo courtesy of HSBC.

Hit by economic headwinds, 2023 was a challenging year for global trade, and Vietnam being twirled in that circle saw significant drop in their export volumes.

First quarter of 2024 continues to witness global maroeconomic downturn, rising inflation, geopolitical uncertainites and trade disruptions (Red Sea issue), which will have an indirect impact on global trade and eventually on Vietnam.

But despite these challenges, there’s one sector which clearly stood head and shoulders above the others, that is agriculture.

A pillar in Vietnam’s GDP

Contributing roughly 12% to Vietnam’s GDP, agriculture has long been the backbone of Vietnam’s economy for a number of comparative advantages like cultivation land, forest cover, sea territories, tropical climate, available and cost effective labor.

In 2023, Vietnam’s agricultural sector experienced its highest growth in the past 10 years reaching 3.83%, with rice production going up by 1.7%, meat production increasing 3.5% whereas fishery products was up 2.9%.

The high yields boosted the agriculture sector’s export turnover to over $53 billion, while the trade surplus was more than $12 billion, accounting for 42.5% of Vietnam’s total trade surplus.

Vietnam's key exports are rice, coffee, cashew nuts and fruits and vegetables, accounting for more than $16 billion of agricultural exports. Photo courtesy of the Ministry of Industry and Trade.

Vietnam's key exports are rice, coffee, cashew nuts and fruits and vegetables, accounting for more than $16 billion of agricultural exports. Photo courtesy of the Ministry of Industry and Trade.

Vietnam currently exports a broad range of agricultural products all over the world. Its key exports are rice, coffee, cashew nuts and fruits and vegetables, accounting for more than $16 billion of agricultural exports. Among them, many have successfully gained access to new markets.

Since the beginning of the year, we have seen that durian, coffee and rice prices have increased by 20%, 5-9%, and 6% respectively. The total export turnover of agricultural, forestry and fishery products could estimatedly climb to $54-55 billion in 2024.

Shining amidst global agriculture

Thanks to the rapid growth, Vietnam is becoming a key player in global agriculture. The Vietnamese Government has put a lot of effort in promoting agriculture, placing it under the global spotlight. One of them was the Ministry of Agriculture and Rural Development's (MARD) decision in December 2023 to approve the establishment of the scheme on Food Innovation Hub Vietnam (FIHV), aiming to foster more innovation.

Vietnam’s 16 Free Trade Agreements (FTAs) along with a few others under negotiation have paved the path for its agriculture exports. Taking the EU-Vietnam Free Trade Agreement (EVFTA) as an example, this FTA has helped Vietnam eliminate up to 94% of tax lines for fruits and vegetables, creating a competitive advantage over Thailand and China.

Specifically for rice, the preferential tariffs from EVFTA has benefitted Vietnam compared to countries like Cambodia, Thailand and India. Vietnam has now become one of the largest sources of cashew nuts and coffee for the EU.

Moreover, in 2018, MARD issued a list of key national products, which includes rice, coffee, rubber, cashews, pepper, tea, etc. They are eligible for preferential support measures including exemptions from or reductions in land or water surface rents, preferential credit, human resources training, etc.

Green agriculture

Tackling climate change is a key focus area for the Goverment to help agriculture sector to thrive sustainably. Due to Vietnam's geographic exposure, it is particularly susceptible to climate change with a serious effect on agriculture.

Following Vietnam's bold net zero commitment at COP26, the Government approved the National Green Growth Strategy 2021-2030 with vision to 2050, which is an important policy document for the country’s economic growth and sustainable development, with specific goals related to greenhouse gas emission reductions. The proportion of organic fertilizer products, the use of biological pesticides as well as applying advanced water-saving irrigation methods are expected to rise substantially over the coming years.

Last year, the Vietnamese Government also approved the National Electricity Development Plan for 2021-2030, with a vision to 2050. Known more commonly as the Power Development Plan 8 (PDP8), after almost three years in the making, this masterplan highlights the significant investment required to develop Vietnam’s energy sector and presents potential opportunities for foreign energy firms.

Once executed, this would encourage more clean energy projects in agriculture production, protecting the environment as well as saving energy cost. This would create a path to attract international investors in agriculture to the country, positively impacting the growth of the overall sector.

Consensus on growth

From agriculture companies to financial institutions, agriculture’s sustainable growth has been the key topic. Agriculture companies have become more proactive and serious in developing and executing their sustainability strategy – from circular economy, to sustainable supply chain, and other environmental and community support programs.

The focus on green agriculture not only helps Vietnam reduce its carbon footprint in agriculture productions, but also meets the increasing demand from export markets such as the U.S or EU.

Through the growth of the industry, those companies have also become much more agile and sophisticated in how they manage their treasury activities, moving away from cash transactions to online platforms. They are also looking for ways to digitalize their internal activities, and further improve and optimize their working capital.

In the support given to this segment of corporates, the Government has provided various initiatives, notably the State Bank of Vietnam’s capped VND short-term lending interest rate at 4%.

Financial institutions also play a significant role in advancing agriculture's net zero agenda by channelling green finance, educating the market and helping agriculture companies build a sustainability mindsdet. Banks’ support is not limited to green trade or machinery/capex only, but also extending to provide guidance, financing as well as industry insights.

For example, at HSBC, in line with our overall sustainability strategy, we have been helping clients, in different sectors such as farming, seafood exporters, animal feed companies, sugar exporters or dairy companies, on their net zero transition journey.

Our sustainability strategy has, at its core, a commitment to support our customers understand and act on their transition to lower emissions and to help them achieve their wider sustainability ambitions. We are leading the way to meet our client’s sustainability needs with solutions ranging from green trade financing options to sustainability linked loans to sustainable supply chain finance. Such solutions would open up a world of opportunity for agriculture companies to tap into green finance to support their growth and sustainability agenda.

Opportunities to seize

As a key pillar in the Vietnamese economy, agriculture has experienced momentous transformations over the past few years. However, to maximize these opportunities, it’s imperative to have certain policy changes to bolster innovation and hi-tech investments.

A clearer execution plan for PDP 8 and Just Energy Transition Partnership (JETP) are necessary to materialize the benefits and attract foreign investments. The government also needs to provide certain incentives regarding green financing to ensure corporates can accelerate their transition plans at pace.

With a strong commitment from the Government and the multiple signed FTAs, the opportunities in the agriculture sector are enormous. We hope it continues to be a beacon for Vietnam’s GDP growth.

Comments (0)
  • Read More
Vietnam T&T Group, Qatar partner to build $3.2 bln Disneyland park in Hanoi

Vietnam T&T Group, Qatar partner to build $3.2 bln Disneyland park in Hanoi

Vietnam’s conglomerate T&T Group and Qatar’s JTA International Investment Holding will jointly build a $4.5-billion sports and entertainment complex in Hanoi, featuring a Disneyland theme park worth $3.2 billion.

Infrastructure - Fri, November 1, 2024 | 12:08 pm GMT+7

AirAsia to collect mandatory carbon fee starting 2025

AirAsia to collect mandatory carbon fee starting 2025

Malaysia-based carrier AirAsia will begin imposing a mandatory carbon fee on all passengers starting January 1, 2025, according to the country’s Transport Minister Anthony Loke.

Southeast Asia - Fri, November 1, 2024 | 12:05 pm GMT+7

At least seven killed in bridge collapse in Indonesia

At least seven killed in bridge collapse in Indonesia

At least seven people were killed and dozens of others were injured when a seaside bridge collapsed in the Maluku island region in eastern Indonesia on Thursday.

Southeast Asia - Fri, November 1, 2024 | 12:04 pm GMT+7

Thailand to raise retirement age to 65

Thailand to raise retirement age to 65

Thailand's Labor Ministry plans to raise the retirement age for both private and government sectors to 65 years, the same as in Singapore and Switzerland, according to Labour Minister Phiphat Ratchakitprakarn.

Southeast Asia - Fri, November 1, 2024 | 12:03 pm GMT+7

A quarter of Singapore’s fish farms stop operations in past year

A quarter of Singapore’s fish farms stop operations in past year

About a quarter of Singapore’s sea-based fish farms have exited the industry over the past year, figures from Singapore Food Agency (SFA) showed.

Southeast Asia - Fri, November 1, 2024 | 12:02 pm GMT+7

Malaysia plans to launch national AI office

Malaysia plans to launch national AI office

The Malaysian Government plans to launch the National Artificial Intelligence Office (NAIO) in Kuala Lumpur on December 12, according to the country’s Digital Minister Gobind Singh Deo.

Southeast Asia - Fri, November 1, 2024 | 12:00 pm GMT+7

Vingroup posts Q3 earnings of $80 mln, highest in five years

Vingroup posts Q3 earnings of $80 mln, highest in five years

Vingroup, the largest private multi-industry conglomerate in Vietnam by ecosystem, recorded a consolidated net profit of VND2,015 billion ($79.54 million) in Q3/2024, the heftiest quarterly earnings in the past five years.

Companies - Fri, November 1, 2024 | 11:54 am GMT+7

Thailand SCG to invest $700 mln more in $5 bln petrochemicals complex in Vietnam

Thailand SCG to invest $700 mln more in $5 bln petrochemicals complex in Vietnam

Thailand’s Siam Cement Group (SCG) will invest an extra $700 million in the $5.2 billion Long Son Petrochemicals Complex (LSP) in Vietnam’s southern province of Ba Ria-Vung Tau to diversify its production.

Industries - Fri, November 1, 2024 | 10:20 am GMT+7

Vietnam manufacturing activity rebounds, recovering from typhoon Yagi

Vietnam manufacturing activity rebounds, recovering from typhoon Yagi

The Vietnamese manufacturing sector in October started to recover from the effects of September's super typhoon, recording renewed increases in both output and new orders.

Economy - Fri, November 1, 2024 | 8:34 am GMT+7

Vietnam private lender VietBank logs 96% profit growth in 9 months

Vietnam private lender VietBank logs 96% profit growth in 9 months

Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank) posted a 96% year-on-year surge in pre-tax profit in the first nine months of 2024 to reach VND820.4 billion ($32.46 million), or 78% of the year's target.

Banking - Fri, November 1, 2024 | 7:45 am GMT+7

Maersk opens its first bonded warehouse in Vietnam

Maersk opens its first bonded warehouse in Vietnam

Denmark's integrated transport and logistics giant A.P. Moller - Maersk (Maersk) on Thursday opened its first bonded warehouse in Vietnam at SLP Park, Nam Dinh Vu Industrial Park in Hai Phong city.

Industries - Thu, October 31, 2024 | 11:44 pm GMT+7

ABBank incurs $14 mln loss in Q3

ABBank incurs $14 mln loss in Q3

Hanoi-headquartered An Binh Commercial Joint Stock Bank reported a pre-tax loss of VND343.5 billion ($13.59 million) in the third quarter of this year, while some other private Vietnamese banks posted strong profits.

Banking - Thu, October 31, 2024 | 9:29 pm GMT+7

Vietnam’s emergence as regional manufacturing hub a significant logistics opportunity: SuperPort exec

Vietnam’s emergence as regional manufacturing hub a significant logistics opportunity: SuperPort exec

Southeast Asia’s rise as a vital logistics hub with Vietnam positioned as a key manufacturing center presents a significant business opportunity, says Yap Kwong Weng, CEO of Vietnam SuperPort.

Companies - Thu, October 31, 2024 | 9:01 pm GMT+7

Indonesia steps up support for textile industry

Indonesia steps up support for textile industry

Indonesia’s President Prabowo Subianto held a close-door meeting with several ministers on Tuesday to discuss the current situation of Indonesia's textile industry, particularly focusing on textile giant Sri Rejeki Isman (Sritex).

Southeast Asia - Thu, October 31, 2024 | 6:01 pm GMT+7

Thailand speeds up plans to construct six new airports

Thailand speeds up plans to construct six new airports

Thailand’s Transport Ministry is accelerating development and construction projects on six airports with an aim to become the region's transportation hub.

Southeast Asia - Thu, October 31, 2024 | 6:00 pm GMT+7

Thailand develops eco-friendly seaport model

Thailand develops eco-friendly seaport model

Thailand is striving to implement environmental protection and social sustainability solutions in developing the country’s major infrastructure projects, such as the development of Phase 3 of Laem Chabang Port, Thailand's only deep-sea port.

Southeast Asia - Thu, October 31, 2024 | 5:58 pm GMT+7