The entire sector drew only 0.5 per cent of total registered foreign direct investment (FDI) in the first ten months, the Ministry of Planning and Investment's Foreign Investment Agency (FIA) said, a drop from the 5.3 per cent of FDI it drew in 2007.

Only 42 foreign-invested projects were registered in the sector in the first ten months, worth a total FDI of US$300 million out of a national total of 953 projects worth $58.3 billion.

The majority of investors in the sector were small- or medium-sized businesses with a scale of investment of $2 million or less, according to the Institute of Policy and Strategy for Agricultural Development.

With a declining trend of FDI into the agricultural sector, the goal of $1.5 billion in FDI for agriculture by 2010 would now seem out of reach, said FIA head Phan Huu Thang.

FDI in the agriculture and forestry sector was insignificant, unstable and unevenly distributed among provinces and regions nationwide as well as among different fields, Thang said.

FDI is focused mainly on food processing in key economic regions in the north and south, with little appearing in remote provinces. Forest product processing, livestock farming, and feed processing have also attracted some FDI.

The sources of most FDI in the sector were mainly other Asian countries, such as Thailand, Indonesia, Malaysia and China. There had been a dearth of investment from countries with advantages in agricultural processes such as the US, Canada, Australia and the EU, the FIA said.

Where FDI has flowed into the sector, there has been a demonstrable impact in terms of enhanced exports, improved technology and quality of workforce.

But experts have said the agricultural sector has remained unattractive to many foreign investors due to high risk, such as vulnerability to weather, and the need to invest in remote rural areas. Profit margins in the sector were also often low.

Le Van Minh, head of the Ministry of Agriculture and Rural Development's International Co-operation Department, said the ministry would continue to work to completes number of policies and procedures to improve rural infrastructure and simplify licence-granting procedures in order to effectively promote investment and reduce the risk for investors in the sector.

The ministry will also step up calls for FDI into agricultural and feed products and forest and wood products processing, as well as increase investment promotion efforts, to further boost the export value of Viet Nam's agricultural products, Minh said.

Source: Viet Nam News