|Agriculture output per worker in Việt Nam is one-third of Indonesia’s and less than half of Thailand’s and the Philippines’.-Photo ADB|
This is according to the Asian Development Bank (ADB)’s Outlook 2017, released in Ha Noi on Monday.
ADB country director for Viet Nam Eric Sidgwick said agricultural output was expected to pick up in 2017, given the outlook for higher global food prices and a return to better weather.
However, the sector continues to underperform relative to the rest of the Vietnamese economy, dragging overall growth down, he said.
Agriculture has been a significant driver of growth, poverty reduction, food security and exports since the Government began reforming the sector in the late 1980s. However, in recent years, in the face of growing international competition and low domestic labour productivity, the sector’s growth has slowed to an average of just 2 per cent per annum since 2011.
Labour productivity is seen as key factor. The report highlights that agriculture output per worker in Viet Nam is one-third of Indonesia’s and less than half of Thailand’s and the Philippines’.
“While Viet Nam continues to address the worsening impact of climate change on agriculture, deeper reforms and higher investment in the sector will be critical to boost agricultural productivity and long-run growth that is inclusive and environmentally sustainable,” Sidgwick said.
“The most important thing is how to utilise the land. Land should be consolidated and the profitability of farmers should be improved,” Sidgwick said.
The report stresses that to transform agriculture, a number of major policy challenges will need to be addressed, including introducing greater competition in agricultural supply chains and post-harvest processing, developing rural infrastructure to support higher value-adding cash crops, adopting more sustainable natural resource management practices and better integrating climate change considerations into policy making processes.
As Viet Nam recovers from its most severe drought in a decade, boosting growth of the sector will be vital for the country to achieve its aspiration of becoming an upper-middle income nation by 2030.
As for foreign direct investment (FDI), with record FDI in 2016 and new commitments, ADB says the disbursement is likely to rise in 2017 and 2018. In the first quarter of this year, the disbursement reached US$3.6 billion, up 3.4 per cent from last year.
The outlook also highlights that as growth strengthens, inflation is expected to edge up to 4 per cent this year and 5 per cent next year. The expected rise in world food and fuel prices, higher US interest rates and a stronger dollar will add to imported inflation. Another likely source of inflation is the continued implementation of the Government roadmap on administered prices for education, health, electricity, water tariffs and minimum wages.
Merchandise exports are seen rising by an annual rate of 10 per cent over the next two years as new foreign-invested factories start producing and new trade agreements take effect.
“Imports are likely to rise even faster as larger FDI inflows draw in additional import of capital goods and manufacturing inputs. The current account surplus is thus expected to moderate to 2 per cent of the GDP this year and 2.5 per cent in 2018,” the outlook noted.
Public debt pressures have prompted the Government to set ambitious targets for the budget deficit, reining it to the equivalent of 3.5 per cent of the GDP this year and holding it to some 4 per cent next year. However, most of the reduction in the fiscal deficit would be due to higher receipts from the sale of equity in State-owned enterprises, which the Government treats as revenue.
On the expenditure side, the Government plans to cut recurrent expenditure by 6 per cent while raising capital expenditure by 36 per cent.
“Achieving fiscal consolidation over the medium term will be challenging and require deeper tax reform, better revenue administration and much more efficient public expenditure,” the outlook stated.