Online Seminar: Agricultural Processing Needs New Policies, Not Just Export Focus

Vietnam's Agricultural Sector Must Shift from Raw Exports to Value-Added Processing

On the morning of May 12, BizLIVE hosted an online seminar titled "Agricultural Processing Adapting to New Integration Stages." The event featured key speakers: Mr. Nguyen Quoc Toan (Director of the Department of Agricultural Product Processing and Market Development, MARD), Prof. Dr. Bui Chi Buu (Former Director of the Southern Institute of Agricultural Science and Technology), Mr. Vu Manh Hung (Chairman & CEO of Hung Nhon Group, Vice Chairman of Vietnam Digital Agriculture Association), and Mr. Nguyen Ngoc Luan (Founder of Meet More Fruit Coffee, Vice Chairman of the Vietnamese Entrepreneurs Association in Australia).

The Urgency to End Raw Exports

Opening the seminar, Mr. Nguyen Quoc Toan highlighted the widespread concern over the COVID-19 pandemic's impact. He emphasized the need to leverage Vietnam's potential domestic market of nearly 100 million people and the advantages of its agricultural production, including its adaptability to climate change.

Mr. Toan noted that Vietnamese agriculture has seen significant changes in the last five years, with an annual growth of $3-4 billion USD in the past four years, indicating strong development. However, he stressed, "We cannot continue the situation of raw exports. We must transform and adapt to export markets, as well as to natural disasters and epidemics."

He pointed out that the domestic market is a crucial potential area, requiring focused policies, infrastructure, and increased awareness among citizens as both producers and consumers. The state needs new policies that prioritize not only exports but also the utilization of the domestic market. Additionally, building value chains and ecosystems that connect farmers, producers, and distribution channels is essential to reduce intermediaries and offer Vietnamese products at more affordable prices to domestic consumers. "Developed countries also consider their domestic market a vital one," Mr. Toan added.

Mr. Vu Manh Hung remarked that while the current COVID-19 situation presents risks, it also offers opportunities for businesses. "Through this pandemic, we affirm that agriculture is the foundational support for Vietnamese enterprises," he stated.

Mr. Nguyen Ngoc Luan echoed the long-standing discussion about the domestic market, stemming from the recurring issues of bumper crops leading to price drops, or high prices due to poor harvests.

Mr. Luan observed that despite the potential of the domestic market and campaigns encouraging "Vietnamese people to prioritize Vietnamese goods," consumers haven't fully embraced local products. He attributed this to farmers and businesses failing to invest sufficiently in processing, leading to products that lack visual appeal or consistent quality, especially given consumers' preference for foreign goods.

Embracing Technical Barriers and Opportunities

Mr. Nguyen Quoc Toan explained that Vietnam has systematically restructured its agriculture, focusing on processing and market reorganization. This has yielded initial positive results, with agricultural exports reaching $41 billion USD in 2019, ranking second in ASEAN and 15th globally.

However, he emphasized the need for sustainability. Vietnam's deeply integrated agricultural sector means market changes directly impact businesses. "With COVID-19, even though it only lasted about 4 months, it had a very strong impact on businesses in general and agricultural businesses in particular. These changes will test the resilience of businesses in terms of governance, strategy, finance, and so on," he noted.

Vietnam is part of a multi-layered market, having signed 16 FTAs, including the CPTPP and the Vietnam-EU FTA last year. This provides significant impetus for the economy and agriculture. "Nevertheless, we must not be complacent. We need to pay more attention to technical barriers, technical improvements, and quality to effectively and sustainably leverage opportunities," Mr. Toan cautioned.

Regarding market structure, China remains the largest export market (around 25%), followed by the US (24%), and Europe (about 12%). Mr. Toan noted that COVID-19 has disrupted global supply chains. Even if Vietnam successfully controls the epidemic, it will still be affected if other countries struggle. "Therefore, we should address this by focusing on the domestic market, with strong participation from the State, businesses, and citizens," he advised.

Applying Industry 4.0 to Agricultural Production and Processing

When asked how to increase the value of Vietnamese agricultural exports, which are currently lower than many other countries, Mr. Nguyen Quoc Toan distinguished between "cost" and "value." To increase product value, agricultural product quality must be enhanced. This requires reviewing input stages, as well as the logistics costs of agricultural exports, particularly high air transport costs. He also stressed the importance of agricultural credit, increasing access to capital for farmers and processing businesses.

Mr. Vu Manh Hung observed that Vietnamese businesses often neglect branding and, consequently, product quality. They also underinvest in processing machinery and international standards like GlobalGAP. He urged businesses to understand standards, advantages, and barriers. Crucially, they need to apply Industry 4.0 technology, analyze opportunities and challenges, and proactively grasp policies that drive business development. Overcoming barriers will unlock development opportunities, foster linkages with foreign corporations, and encourage investment in modern technologies. He also recommended that the state and local authorities reform policies to develop agriculture in general and the processing industry in particular.

Underinvesting in Processing Industry

Prof. Dr. Bui Chi Buu noted that Vietnam has excelled in production, leading to rapid productivity growth. However, in processing technology, there are issues with raw materials, factories, and inadequate processing technology. While the Prime Minister aims for Vietnam's agro-forestry-fishery processing industry to reach 7-10% by 2030, it currently stands at 5%.

"It's clear that our scientific depth is very weak, and our investment in the processing industry is very modest. This is a weakness when we want to achieve high growth rates. Another paradox we observe is that despite being the world's second-largest rice exporter, our farmers remain very poor. Businesses can only share part of the burden; the state still needs to make significant investments to truly solve the problem," Mr. Buu stated.

Investing in Technology and Diversifying Markets Beyond China

Addressing how Vietnam's processing industry can reach the top 10 globally by 2030, Mr. Nguyen Ngoc Luan suggested that for domestic product development, businesses must focus on brand development.

"I watched a report about coffee farmers in the Central Highlands struggling with consumption. Currently, 100% of our coffee is exported raw, which means farmers gain almost no profit. To increase value, we must invest in mechanization for processing. If we only export raw coffee, businesses will remain in a vicious cycle of only raw exports," Mr. Luan explained.

Mr. Luan proposed that a new direction for businesses is to process coffee products, such as Meet More fruit coffee. This would help products gain a foothold in the market and establish an export direction. "Investing in technology and pursuing completely new directions is what Vietnamese agricultural processing businesses need to research and invest in immediately," he urged.

He also emphasized market diversification. Based on his observations from a recent business meeting, most businesses focus their products on the Chinese market. "I believe Vietnamese agricultural businesses need to research a comprehensive and broader market strategy in the near future," Mr. Luan added.

Regarding the most crucial policy and priority solutions, Prof. Dr. Bui Chi Buu believed that while many policies exist, investment in technology is paramount to enhance competitiveness and create differentiation for Vietnamese agricultural products. This differentiation comes from modern technology. The government should implement policies to encourage and support businesses in investing in technology.

Catching Up with Global Agricultural Giants

Responding to a reader's question as Vice Chairman of the Vietnam Digital Agriculture Association, Mr. Vu Manh Hung stated that in the context of Industry 4.0, if businesses don't invest thoroughly in the most modern and advanced technologies, they will not survive.

"During the COVID-19 pandemic, we also had to consider applying technology to agriculture. Not everyone can develop Industry 4.0 technology due to its high cost. Currently, Vietnam primarily applies GlobalGAP standards. However, if we can integrate both Industry 4.0 technology and GlobalGAP criteria, we will develop very well when exporting agricultural products. We also need to connect value chains and export chains by partnering with foreign corporations to advance. Based on years of research, I estimate that we are 80 years behind foreign agricultural corporations," Mr. Hung revealed.

State Policies Moving in the Right Direction

From the perspective of a state management agency, concerning solutions and policies to support businesses, Mr. Nguyen Quoc Toan said that since the beginning of the term, Minister of Agriculture Nguyen Xuan Cuong has been highly focused on policies to support agricultural businesses.

Accordingly, from January 2019, the Ministry of Agriculture developed a plan to restructure 13 key products, with specific regulations on priority industries and products, linking processing with supporting industries. Furthermore, the government has issued a Decree encouraging investment in agriculture, with priority budgets for the processing sector.

However, to develop the processing industry, many factors are needed, such as raw material zones, with local government participation to identify comparative advantages for developing these zones, thereby attracting businesses.

"Additionally, Decree 55 helps channel credit into agricultural processing. I believe the State's policy is heading in the right direction and is being implemented with strong synchronization. Regarding resources, while the state budget is limited, socialized resources are quite good, as we have many private research institutes affiliated with businesses, enabling them to proactively conduct research and anticipate market trends," Mr. Toan remarked.

The Need for Modern Commercial Infrastructure

Regarding the balance of risks and opportunities in developing Vietnam's agricultural processing industry, Mr. Toan found it challenging to quantify these aspects.

Vietnam is a major agricultural power with numerous export products. Even when only four COVID-19 cases were initially confirmed, the Minister of Agriculture and Rural Development chaired a conference to discuss policies and solutions to combat the epidemic, particularly addressing difficulties in customs clearance at borders. The Ministry also requested a review of seasonal agricultural products, coordination of agricultural supply flows to the borders, and streamlined customs clearance for products like fruit via Lang Son border gate and livestock via Mong Cai.

Mr. Toan stressed that to seize opportunities, human behavior must change, fostering more linkages, sharing, and collective effort, especially during an epidemic.

"Food plays a vital role as the bloodstream, ensuring the stability of the economy. During the pandemic, when people couldn't go to markets, there was a need for better online distribution. We need to establish more modern commercial infrastructure to keep pace with the world, including cashless payment applications. These are issues that modern agriculture needs to address," Mr. Toan stated.

Vietnam is a crucial link in the global agricultural production chain, thus, in an era of globalization, it needs to strengthen linkages and seize opportunities.

Concurring, Mr. Nguyen Ngoc Luan agreed that quantifying risk and opportunity is difficult. However, he believed that agile businesses can restructure themselves and their markets, identify their strengths, and promote exports. Businesses and management agencies should collaborate to organize trade promotion events, giving businesses opportunities to introduce their products to foreign partners.

"We also have very strong overseas business communities; we need to coordinate with these businesses and communities to organize promotion conferences to introduce Vietnamese agricultural products abroad," Mr. Luan proposed. He also suggested changing the common phrase "Vietnamese people use Vietnamese goods" to "Vietnamese people are proud to use Vietnamese goods." He noted that communities are eager to contribute to promoting Vietnamese agricultural products abroad.

How to Form Large Specialized Farming Areas and High-Tech Industrial Zones?

Elaborating on the fragmented state of Vietnam's raw material areas, Mr. Nguyen Quoc Toan explained that effective processing requires several factors: raw material areas, technology, finance, and markets. The raw material area is particularly crucial. For example, a business setting up a factory in Nam Dinh needs a large raw material area, reliable technology, and convenient connecting infrastructure.

"Compared to advanced countries, we don't have large raw material areas. Therefore, the government is encouraging the formation of large specialized farming areas. For instance, Dong Thap has a very large specialized farming area that major corporations have entered, Dong Nai has developed a specialized pig farming area, Son La has a specialized fruit tree area, and the Central Highlands has specialized coffee or passion fruit areas," Mr. Toan listed.

Besides establishing specialized farming areas, investing in technological production lines is also vital. The workforce is equally important; during integration, labor force considerations are key. Vietnam has up to 3 million workers in shrimp processing enterprises, but the labor force in specialized farming areas is sparse. Therefore, it is necessary to develop policies, infrastructure, and living environments specifically for workers in these areas. Without addressing these issues, it will be difficult to form large specialized farming areas and high-tech processing industrial zones.

"To Go Far, You Cannot Go Alone"

Regarding Hung Nhon's model of connecting value chains and "standing on the shoulders of giants" to share risks, while acknowledging the potential for significant damage if the "giant" falls, Mr. Vu Manh Hung explained that with chain linkages, Vietnam has become a crucial link for foreign partners. Globally, chain linkage models have existed for 50-70 years, with excellent human resource and risk management.

"We are also an important link in the value chain. In recent times, businesses have experienced many fluctuations, from African Swine Fever, H5N1, and then COVID-19. To this day, our business is still standing strong and has many opportunities for development. Not everyone can enter a chain link model. However, if we want to go far, we cannot go alone. When the pillars of the chain link are stronger, the entire chain will move faster," Mr. Hung affirmed.

Australian Market Demands High Standards and Quality

The online seminar received a question from Mr. Nguyen Duc Duy of Hoang Khang Import-Export Company for Mr. Nguyen Ngoc Luan: As a member of the Vietnamese Entrepreneurs Association in Australia, can he share opportunities for exporting Vietnamese goods to the Australian market?

Mr. Luan responded that exporting to such markets is not simple, as they demand very high standards and quality. However, if Vietnamese products comply with their standards, agricultural products in particular, and other products in general, can penetrate the market easily. Not only Vietnamese goods but also products from Thailand and Malaysia are abundant in Australia. Currently, Vietnam's most prominent products there are agricultural, and they must meet Australian criteria.

"With our product—fruit coffee—they scrutinize sugar and milk content very rigorously. The tests are very strict, taking up to 3 months to yield results. Then we also have to adjust our formula to meet the standards," Mr. Luan shared.

Journalist Hai Tien asked: "The story of processing technology enhancing the value of Vietnamese agricultural products has much to discuss. However, to summarize it into one issue, one phrase, what would the speakers choose, and what suggestions do they have for businesses?"

Mr. Nguyen Quoc Toan chose the phrase "added value." He emphasized that efforts should focus on producing what the market needs while ensuring farmers' livelihoods, business profits, and proper agricultural restructuring. "Aiming for added value creates competitiveness and comparative advantage. Deep integration brings intense competition and trade conflicts are unavoidable, so we must create added value using Vietnamese intellect to achieve progress, enhance product value, and create breakthroughs in agricultural restructuring in the coming time," he said.

Concurring, Prof. Dr. Bui Chi Buu added two key aspects: maximizing added value for agricultural products and direct marketing to cut out as many intermediaries as possible to reduce logistics costs.

Mr. Vu Manh Hung stated, "We invest in slaughterhouse systems, recognizing the importance of understanding mechanisms and policies, setting directions, and defining tasks to calculate output." He stressed that for businesses to survive, they must adopt high technology, focus on processing for export, and work directly with retailers, avoiding dependence on traders. "The most important thing is processing, technology, and export. If technology is not done well, it will be difficult to access bank capital," he added.

Mr. Nguyen Ngoc Luan concluded: "From this seminar, we can deduce value: value of brand, value of product, and value of the enterprise. To achieve these values, we must have change, and most importantly, a change in mindset. Currently, we cannot do business traditionally or with the 'big fish eat small fish' mentality of the past. If products are launched without changes in methods or quality, we cannot develop. Ultimately, the lesson I draw from my own experience is that we must change our mindset for our businesses and our products when entering the market."

Theo: Bizlive.vn