Agtech in Vietnam – a promising sector poised for significant growth

Vietnam’s agriculture sector continues to play a crucial role in the economy, accounting close to 15% of its overall GDP in 2023. However, the expansion of information technology, the demands of international integration for higher quality agricultural products, the shrinking land area due to urbanization and climate change, coupled with a growing population and increasing food demand, present significant challenges to agricultural production.

The application of science and technology offers solutions to these challenges in agricultural development through advanced technologies such as biotechnology, greenhouse technology, drip irrigation, sensor technology, automation, and the Internet of Things (IoT). These technologies help reduce costs, increase productivity, lower production costs, and improve the quality of agricultural products while protecting the environment. Additionally, high-tech agriculture enables farmers to take control of production, overcome seasonal limitations, reduce dependence on weather and climate, and meet market demands for high-quality agricultural products.

In this article, we discuss some of the opportunities governing the agricultural sector, and delve into the market entry and licensing requirements for internal investors interested to participated in the growing Agtech market vertical in Vietnam.

Public policies and regulatory support

Recognizing the importance of agriculture technology in transforming Vietnam’s agricultural landscape, integrating and developing Vietnam’s agriculture in the new era, the Vietnamese government has set forth development orientations for the agricultural technology sector in the new era as stipulated in Resolution No. 06-NQ/TW dated November 5, 2016. Accordingly, the Vietnamese government emphasizes orientations for developing modern agriculture, applying high technology such as modernization, commercialization of agriculture, strongly shifting towards in-depth agricultural development, large-scale production based on science and technology, with high productivity, quality, competitiveness, and added value. Transforming agriculture from primarily food production to developing a diverse agriculture suitable to the advantages of each region.

In addition, the Vietnamese government has issued many specific mechanisms and policies to attract investment in high-tech agricultural production, support high-tech agricultural enterprises, and offer many incentives for businesses operating in the high-tech agriculture sector. These include applying credit policies to serve the development of high-tech agriculture, flexible loan forms, land rent incentives, and reducing administrative procedures, implementing various policies to enhance the scale and quality of human resource training in the high-tech agriculture sector, facilitating research and technology transfer to improve the productivity and quality of agricultural products… Within the country, there has 34 high-tech agricultural zones planned in 19 provinces and centrally-run cities, with 6 large-scale high-tech agricultural zones covering an area of over 400 hectares in various provinces and cities.

Opportunities for growth

The agriculture sector contributes 14% to the annual GDP, employing 40% of the total workforce, and generating US$50 billion in exports in 2023. With two-thirds of the population residing in rural areas and 17 million smallholders operating on a small scale, the industry remains highly fragmented, characterized by multiple layers of buyers and a lack of transparency. These challenges limit access to finance, increase farming costs, lead to losses and waste, and drive-up supply chain service expenses.

Despite these obstacles, the industry has demonstrated steady growth and strong export momentum in recent years, underscoring the urgent need to address inefficiencies and unlock its full potential.

By 2024, Vietnam’s agriculture highlights:

• Vietnam is also the world’s fifth-largest rice producer.
• Vietnam is also the world’s fourth largest aquaculture production.
• Vietnam is also the world’s second-largest coffee producer.

In 2023, the growth of the agriculture and rural development sector was reported at 3.83%, with total export turnover of agriculture, forestry, and fisheries exceeding US$53 billion, and a trade surplus of US$12.07 billion, the highest figure to date. The Ministry of Agriculture and Rural Development has set a growth target for the agricultural sector between 3.2% – 4% in 2024, with a total export turnover of US$54-55 billion.

However, the rapid shift in Vietnam’s population from farming to other sectors has posed a significant challenge. Last year, the number of workers in the agriculture, forestry, and fisheries sectors was 13.8 million people, down 118,900 people, equivalent to a decrease of 0.9% compared to the previous year (GSO). Undoubtedly, technological advancements play a crucial role in the development of agriculture, particularly in scenarios where labor availability is limited.

Business Lines and Market Entry Conditions in Agtech

Currently, Vietnamese Laws do not specifically define Agtech. However, the scope of Agtech enterprises can be inferred from the Decision No. 176/QD-TTg dated January 29, 2010, approving the Project on High-Tech Agricultural Development until 2020, high-tech agriculture is defined as an agriculture that utilizes high technology in the production of agricultural goods with superior quality, productivity, high added value, and environmental friendliness.

According to Article 66 of the Law on Crop Production, the high technologies prioritized and encouraged for application in cultivation include: (i) Biotechnology, (ii) Water-saving irrigation technology, soilless cultivation, (iii) Greenhouse production technology, (iv) Information technology for forecasting harmful organisms, (v) Automation in production.

Thus, high-tech agriculture can be understood that appropriately applies new, advanced technologies in production to enhance efficiency, create breakthroughs in productivity and quality of agricultural products, satisfy the increasingly high demands of society, and ensure sustainable agricultural development. In general, the business lines within Agri-Tech activities may include the following sectors:

Agricultural Production:

• Utilizing high technology to enhance the productivity and quality of agricultural products.
• Applying automation and control technology to optimize production processes.

Biotechnology:

• Developing new crop and livestock breeds, including the use of biotechnology to improve breeds and product quality.

Drones and Robotics in Agriculture:

• Producing or applying drones and robots to monitor, manage, and perform tasks in agricultural production.

Information and Communication Technology:

• Developing or applying software applications and intelligent management systems to support the management and operation of agricultural activities.

The common business lines for market entry in Vietnam are: