Rural areas and the agriculture sector have provided the main impetus for the nation's rapid growth in the post doi moi (renewal) period, but the sector has not received sufficient investment or help from the Government, experts say.
Vietnam's rural areas are still thirsty for funds to develop production and trading activities because capital injection from the Government has been relatively modest, a Thoi Bao Kinh Te Sai Gon (Saigon Economic Times) report cites several experts as saying.
Between 2003 and 2007, the State's investment in agriculture met just 17 percent of the sector's demand. The Ministry of Agriculture and Rural Development has, in fact, reported that investment in rural areas and agricultural production has decreased in recent years.
In spite of accounting for 20.91 percent of the GDP (Gross Domestic Product) in 2009, total capital invested in the agricultural sector accounted for just 6.26 percent of total State budget revenue, 0.19 percent lower than 2008.
The percentage is considered to be much lower than in regional countries including the Republic of Korea, Malaysia and the Philippines where agricultural investment often accounts for more than 20 percent of their total State budget revenue.
Dr Nguyen Thi Kim Thanh, director of the Banking Strategy Institute, said the source of capital injected into rural enterprises and individuals is bank branches operating in localities, the Vietnam Bank for Social Policy, credit funds, small scale financial institutions, programmes and projects funded by the Government and non-governmental organisations.
Between 2005 and 2009, the capital that the Government pumped into projects in rural areas increased by an average of 12 percent per year. However, in 2009, this accounted for just 1.04 percent of the GDP, according to Pham Huy Hung, chairman of the Vietnam Bank for Industry and Trade.
Dr Nguyen Minh Phong of the Hanoi-based Institute for Socio-economic Development also revealed that the Government's investment into capital construction in rural areas was too small at just 9.91 trillion VND (200 million USD) in 2009.
The country should have invested much more in the agricultural sector since the World Trade Organisation (WTO) allows agricultural subsidies to account for 10 percent of the agricultural sector's GDP (equivalent to 1.2 billion USD) in addition to 4 trillion VND (200 million USD) from the State budget, Phong said.
The agricultural sector is not an attractive investment area for both domestic and foreign enterprises because of inherent risks such as crop failures caused by bad weather, pests and diseases, Thanh said.
Poor infrastructure in rural areas has limited their capacity to attract capital sources including foreign direct investment. FDI projects in agriculture now represent just 0.59 percent of the value of the country's total.
Credit organisations also exercise undue caution in rural areas, said Nguyen Huu Nghia, director of the Department of Monetary Forecasting and Statistics under the State Bank of Vietnam.
The banks' loans to the agricultural sector in 2009 accounted for just 15.55 percent of the total, Nghia said.
Explaining the situation, Thanh said most banks prefer to lend to high and stable income earners who want big loans rather than to poor people. The latter usually need small loans and faced high risks, which push up the banks' costs.
Phong of the Institute for Socio-economics Development said that Vietnam's policies were not attractive enough to divert capital sources from society into agriculture and rural areas.
He suggested the Government strengthen credit activities in rural areas./.
Vietnam's rural areas are still thirsty for funds to develop production and trading activities because capital injection from the Government has been relatively modest, a Thoi Bao Kinh Te Sai Gon (Saigon Economic Times) report cites several experts as saying.
Between 2003 and 2007, the State's investment in agriculture met just 17 percent of the sector's demand. The Ministry of Agriculture and Rural Development has, in fact, reported that investment in rural areas and agricultural production has decreased in recent years.
In spite of accounting for 20.91 percent of the GDP (Gross Domestic Product) in 2009, total capital invested in the agricultural sector accounted for just 6.26 percent of total State budget revenue, 0.19 percent lower than 2008.
The percentage is considered to be much lower than in regional countries including the Republic of Korea, Malaysia and the Philippines where agricultural investment often accounts for more than 20 percent of their total State budget revenue.
Dr Nguyen Thi Kim Thanh, director of the Banking Strategy Institute, said the source of capital injected into rural enterprises and individuals is bank branches operating in localities, the Vietnam Bank for Social Policy, credit funds, small scale financial institutions, programmes and projects funded by the Government and non-governmental organisations.
Between 2005 and 2009, the capital that the Government pumped into projects in rural areas increased by an average of 12 percent per year. However, in 2009, this accounted for just 1.04 percent of the GDP, according to Pham Huy Hung, chairman of the Vietnam Bank for Industry and Trade.
Dr Nguyen Minh Phong of the Hanoi-based Institute for Socio-economic Development also revealed that the Government's investment into capital construction in rural areas was too small at just 9.91 trillion VND (200 million USD) in 2009.
The country should have invested much more in the agricultural sector since the World Trade Organisation (WTO) allows agricultural subsidies to account for 10 percent of the agricultural sector's GDP (equivalent to 1.2 billion USD) in addition to 4 trillion VND (200 million USD) from the State budget, Phong said.
The agricultural sector is not an attractive investment area for both domestic and foreign enterprises because of inherent risks such as crop failures caused by bad weather, pests and diseases, Thanh said.
Poor infrastructure in rural areas has limited their capacity to attract capital sources including foreign direct investment. FDI projects in agriculture now represent just 0.59 percent of the value of the country's total.
Credit organisations also exercise undue caution in rural areas, said Nguyen Huu Nghia, director of the Department of Monetary Forecasting and Statistics under the State Bank of Vietnam.
The banks' loans to the agricultural sector in 2009 accounted for just 15.55 percent of the total, Nghia said.
Explaining the situation, Thanh said most banks prefer to lend to high and stable income earners who want big loans rather than to poor people. The latter usually need small loans and faced high risks, which push up the banks' costs.
Phong of the Institute for Socio-economics Development said that Vietnam's policies were not attractive enough to divert capital sources from society into agriculture and rural areas.
He suggested the Government strengthen credit activities in rural areas./.
