Vietnam - Climate-smart shortfall

To effectively mobilise finance in greening the agriculture sector, a smart mix of public and private financing mechanisms is required.

Vietnam is in dire need of private financing to develop its climate-smart agriculture. Minister of Agriculture and Rural Development (MARD) Cao Duc Phat told last week’s Second Global Conference on Agriculture, Food Security and Climate Change in Hanoi that Vietnam needed to attract significant investment to implement its agriculture and rural development action plan for 2011-2015 in response to climate change.

“The MARD estimates the required resources at $3.5 billion. With only $130 million currently available from public sources, it is clear that private investment will need to be unlocked to deliver Vietnam’s green growth strategy,” he said.

According to the MARD’s estimations, this $3.5 billion breaks down to 70 per cent for infrastructure such as hydraulic works, 8 per cent for improvement of rural infrastructure, and 12.5 per cent to agriculture, forestry and fisheries combined. Investment would help the programme reach a “triple 20 per cent by 2020” target, with 20 per cent reduction of greenhouse gas emissions, 20 per cent poverty reduction and 20 per cent increased growth, Phat said.

“We need new ways of farming to ensure these new approaches are low-carbon,” he said.

However, International Finance Corporation senior operations officer Hans Dellien said it was almost impossible for Vietnam to mobilise such a huge sum immediately.

“To effectively mobilise finance in greening the agriculture sector, a smart mix of public and private financing mechanisms is required,” Delliens said.

Meanwhile, the World Economic Forum’s Green Growth Action Alliance pinpointed in its “Financing climate smart agriculture in Vietnam” that numerous barriers to private investment for low-carbon agriculture in Vietnam.

For instance, in terms of policy there existed uncertainty surrounding the current regulatory frameworks for private sector investment, like microfinance or risk sharing facilities. In another case, land allocation regulations were making diversification of crops more difficult.

In terms of market, Vietnam had a fragmented market with millions of farmers having an average farm size of below four acres. In terms of finance, there is absence of finance mechanisms with an acceptable risk profile for domestic banks to lend to farmers. Meanwhile, inflation, interest rates and regulations are limiting the capacity of banks to grow and lend in accordance with demand.

“To obtain an environmental friendly agricultural sector that promotes green growth, we will continue strengthen cooperation with foreign partners and encourage private players to invest in agriculture,” Phat said.

Thanh Thu | vir.com.vn

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