It’s a turn-around that has been nothing short of remarkable. Since embarking on a series of stunning economic reforms in the 1980’s, Vietnam has gone from a nation heavily affected by food shortages, to being one of the world’s leading producers and exporters for a number of crucial food crops, including coffee, peanuts, walnuts, pepper, and (of course) rice.
While the agriculture sector now accounts for less of the Vietnam’s overall GDP than before, due to a developing service economy, its value has continued to grow steadily over the years: up by 3.36 percent in 2022, with revenues of $53.22 billion. Agriculture is responsible for more jobs than any other sector – and around 36% of the labour market. Last year Vietnam exported $3.4 billion of walnuts, $2.3 billion of (green) coffee, $2 billion of rice and US$1.8 billion of pepper. It is the EU’s largest source of cashew nuts too – nearly 100,000 tons last year. Rice prices are currently surging, as a result of concerns about the potential impact of El Nino; Vietnam’s rice exports for January-May were up 30% on 2022, and farmers could be in for a windfall.
With a population of nearly 100 million, Vietnam is now the fifth largest consumer of rice globally, and, with rapid population growth and increasing household incomes, its livestock consumption has increased dramatically too. Livestock production, however, remains fragmented, with 85% of livestock being raised on small farms in 2019, despite it being the third-largest market for meat in East Asia that year.
As well as receiving strong government support, the overall agricultural sector brought in 12 significant FDI projects last year, worth around $68 million. It is a relatively unrestricted field for foreign direct investment.
Free Trade Agreements
Vietnam is now party to a total of 15 different FTAs, including (since 2020) with the EU – the EVFTA. Whilst opening up new markets for agricultural exports, these agreements also have the effect of exposing Vietnam to powerhouse agricultural exporters, such as Australia. In some situations, this may become something of a one-way-street, as Vietnam’s producers struggle to comply with quality and other standards required by target markets, while presenting an open door to their own domestic market.
Having diversified its production, and now being highly integrated into international markets, Vietnam knows it has to keep upgrading technologies and systems, right through its agricultural supply chains – from feeds to logistics, and from mechanisation to testing and packaging. Though some larger producers (such as TH Group and Vinamilk) have invested heavily in technology in recent years, “agtech” is a relatively unknown concept in Vietnam’s rural areas. There is massive potential for both local and foreign investors.
Green growth
Vietnam’s government has a national strategy for green growth in agriculture. It has tough targets for 2030, including for the use of organic fertilizers (which it wants to account for one third of use), as well as water saving, and the protection of forest cover. Such green policies, Hanoi hopes, will strengthen Vietnam’s hand with the eco-conscious EU, both in terms of export opportunities, and the attraction of FDI.
The greening of Vietnam’s agricultural production and processing, still very reliant on old, inefficient equipment and methods, is an opportunity for the producers of more advanced equipment and technologies. From seeding, spraying and spreading, though to harvesting, as well as advanced, environmentally friendly animal husbandry and livestock management solutions, Melchers Vietnam is seeing strong demand for increasingly sophisticated products and services in 2023, and we expect that to continue and develop further in the next few years.
Melchers in Vietnam
The Melchers Group started activities in Vietnam in the 1980s and officially inaugurated its first branch in Ho Chi Minh City in 1990. Today, the company’s offices in Ho Chi Minh City and Hanoi coordinate Melchers’ trading activities in Vietnam.
Melchers Vietnam has been engaged in the agriculture business in Asia since the year 2000. Today we are one of the major suppliers of sophisticated high-quality products in this market segment. Thanks to our broad portfolio of carefully selected European and American premium machinery, we are proud to be in a position to fulfil our customers’ increasingly advanced agtech requirements in Vietnam, and all across East Asia.
Whether you are a buyer, producer, supplier or entrepreneur, join us as we continue building a future of business opportunities.
