A. OVERVIEW AGRICULTURE SECTOR VIETNAM
Since 2016, the exports of many products in the agriculture
sector in Vietnam has strongly increased. On the other hand, the
agriculture sector is still vulnerable as shown in the past due to
its limited development.
The development of the agriculture sector in Vietnam needs to come
on track to solve the important issue on shifting from price to
quality to ensure sustainable growth as backbone sector of
Vietnam's economy.
However, to ensure high quality products, Vietnam needs to make
changes.
Firstly, the use of prohibited chemicals during breeding,
preservation, digestion needs to be enforced and controlled by
state authorities. The stricter control of raw materials before
digestion and the manufacturing standards are further issues that
need to be addressed to make the agriculture competitive with
international players. Furthermore, the transformation of the
domestic Vietnamese agriculture into a self-sufficient sector is
another important step that needs to be realized.
In addition, to ensure sustainability, growth and for protection
against crisis, farmers need to earn stable income, the
farmers' carbon footprints need to get reduced and the
production must be adjusted to the requirements of the consumers
and demand in the market.
However, for solving these problems, long term solutions need to be
enrolled, those can be (i) increased food safety, (ii)
diversification of products, (iii) improvement of regulatory
environment, (iv) observing costs and improved finance, (v) the
dependence on China in fruits, vegetables and pork meat must be
addressed due to caused problems in the past.
On the other hand, Vietnam's export of dragon fruit to
Australia and export of poultry to Japan shows capability of
Vietnamese exports meeting high safety requirements.
If the current issues can be addressed in the future, Vietnam's
exports in agriculture sector will show sustainable growth in the
future.
B. ISSUES
1. Traceability and safeguarding of products
Vietnamese and international consumers are concerned about quality
and safety of the food they are purchasing.
Currently, there are no well-developed traceability systems of the
government for agricultural products in force. This is leading to
significant consequences for the competitiveness in production.
Further, the potential of product improvement is reduced, exports
and market access is limited.
In Addition, the safety for consumers is deceased leading to low
satisfaction of consumers.
As result of the existing issues, there are almost no financial
incentives for improvement of processes.
However, now, it is possible for the Ministry of Agriculture and
Rural Development (MARD) to monitor animal movements with the help
of the Department of Animal Health for protection against diseases
of animals.
Furthermore, the Ministry of Industry and Trade and the Department
of Livestock Production improved systems for better protection and
regulation of unofficial imports of products from other countries.
This monitoring system shall also improve competitiveness and
market accessibility in foreign countries.
On the other hand, these issues can only be fully addressed if
obtained in regulations. TE Food System is operating a traceability
system helping the authorities in HCMC and surrounding provinces on
monitoring movements of pigs. This system is embedded in Decision
6079/QD. This year, the system was extended to eggs (Decision
3583/QD), chicken and poultry (Decision 3584/QD). Further extension
to fruits, vegetables and beef are planned.
Nevertheless, these systems not only grant possibility on making
regulations, it also can lead to reduced corruption due to better
possibility to control.
For addressing the issue best, the systems should be improved on
including the whole agriculture sector for ensuring sustainable
growth, a fair and well-developed competition between national
famers and international farmers as well as good market access.
2. Management of Plant Protection Products and its approach to
regulation based on science
On 6th August 2015 the Circular No. 21/2015 was released. It is
addressing Management of Plant Protection Products.
However, it contains provisions that could turn out as dangerous to
the economy, environment and to the farmers as displayed in the
following:
The circular contains provision about no registration and the
banning of pesticides falling under GHS Category 3 and 4 in area of
vegetable, tea and fruit. Further, the banning and no registration
of crop protection products for use with vegetables, tea and fruit
with having PHI bigger than seven days of use.
There is no scientific approach behind these provisions. As result,
they could ban the availability on technologies for farmers in
Vietnam operating in vegetable, tea and fruit.
Furthermore, these provisions lead to a significant competitive
disadvantage to the agriculture sector. In addition, they contain
specific risks to the environment, consumers and domestic economy
due to the potential prohibition of the most-developed technologies
bringing biggest amount of safety against diseases and climate
issues to the consumer and possibility of productivity to
farmers.
These provisions should not be adopted due to lack of science-based
approach. Vietnam should handle this issue as other countries in
southeast-Asia did.
3. Import and Export of Plants and Seeds
The import of plants and seeds can be done online in Vietnam. The
purchased seeds have to be registered before the import can be
successful. In cases where the online application file does not fit
with the registration requirements, the import is delayed until
registration is successful.
Enterprises need to be provided with sufficient information or
guidelines to accelerate the import processes and for excluding
delays in imports. On the other hand, export cannot be done online,
thus, exports of plants and seeds need an insufficient amount of
time.
The online export should be made possible for more efficiency in
Vietnam.
4. Legal environment on banned substances and reduction of
Antimicrobial Resistance
The last issue addresses the enforcement of regulations on bans and
limitations regarding substances and the reduction of Antimicrobial
Resistance. The use of antibiotics in animal nutrition can have
various good effects such as prevention of diseases or treatment
against them. On the other hand, it has bad impact on the consumer
by means of the human body is building resistance against
antibiotics leading to significant health risks for
consumers.
As result, Vietnamese lawmakers have made big efforts to enforce
existing regulations regarding to violations on the use of banned
antibiotics and other substances.
Several circulars have been provided containing a list of
prohibited chemicals and antibiotics on import, use in livestock
and trading. However, the Circular No. 28/2014/TT-BNNPTNT is only
addressing a few types of banned antibiotics and substances. After
releasing the circular, many farmers concluded about reducing the
use of antibiotics in animal nutrition and tried to replace them
with alternative substances. Therefore, the government should
endeavor research activities on alternative treatments and
substances.
Another important measurement for enforcing the regulations were
urine test kits for scanning on prohibited substances and
uncovering violations against the regulations. Violations can lead
to hard penalties up to the obligation on killing all animals on
the farm. As result, it was possible to reduce the overuse of
prohibited substances.
Moreover, the mass usage of antibiotics is leading to Antimicrobial
Resistance (AMR). According to the WTO, AMR is a huge global
problem and estimated to be main cause of death by 2050 in Vietnam.
Further, the economic costs will be USD 100 trillion!
However, in 2015, the four competent Vietnamese Ministries,
Development Partners and a National Steering Committee signed an
Aide Memoire as action plan against misuse and control of
antibiotics in the livestock production and aquaculture. Vietnam
should adopt measurements and strategies from other countries to
address these issues in a successful way and to ensure strict
enforcement of existing regulations. Further, biosecurity,
monitoring, genetics, nutrition and control are other aspects that
have to be addressed to grant safe products to the consumer without
major health risks and to reduce AMR.
C. OUTLOOK ON MAJOR TRADE AGREEMENTS TPP 11 AND EUVNFTA
In January 2017, US President Donald Trump decided to withdraw
from the US' participation in the TPP. In November 2017, the
remaining TPP members met at the APEC meetings and concluded about
pushing forward the now called CPTPP (TPP 11) without the USA. The
agreement shall be signed by all member states by the first quarter
of 2018. After that, it has to be ratified in each member state
before taking effect.
The effects of the TPP 11 promising great benefits for the
agriculture sector in Vietnam and will support Vietnam's
national agriculture transforming into a self-sufficient and
competitive sector. The TPP 11 is targeting to eliminate tariff
lines and custom duties among member states on certain goods and
commodities to 100%. As a result, international products will
arrive at the Vietnamese market, so that, the Vietnamese livestock
should use the given time for restructuring but also for becoming
competitive and creating efficient environment for international
investments.
With the National and Most-Favored Nation Treatment principle, the
TPP is ensuring a fair competition which will attract new foreign
investments as well as support for the agriculture sector in its
restructuring process.
Moreover, national farmers must adopt high-developed technologies
in nutrients and animal healthcare to be competitive. This will
lead to more safety and trust of the consumer in the agriculture
market in Vietnam.
One another notable major trade agreement is the EUVNFTA between
the European Union and Vietnam. The EUVNFTA offers great
opportunity to access new markets for both, the EU and Vietnam. It
will help to bring more capital into Vietnam. In addition, the
EUVNFTA will boost the most economic sectors in Vietnam. Moreover,
the agreement will eliminate 99% of tariffs on agricultural
products leading to huge dynamic in the sector and Vietnam will get
the chance on adopting technology from the European Union.
Furthermore, the Investor State Dispute Settlement (ISDS) will
ensure highest standards of legal certainty and enforceability and
protection for investors. We alert investors to make use of these
standards! We can advise how to best do that! It is going to be
applied under the TPP 11 and the EUVNFTA. Under that provision, for
investment related disputes, the investors have the right to bring
claims to the host country by means of international arbitration.
The arbitration proceedings shall be made public as a matter of
transparency in conflict cases. In relation to the TPP, the scope
of the ISDS was reduced by removing references to "investment
agreements" and "investment authorization" as result
of the discussion about the TPP's future on the APEC meetings
on 10th and 11th November 2017.
Further securities come with the Government Procurement Agreement
(GPA), which is going to be part of the TPP 11 and the
EUVNFTA.
The GPA in both agreements mainly deals with the requirement to
treat bidders or domestic bidders with investment capital and
Vietnamese bidders equally when a government buys goods or requests
for a service worth over the specified threshold. Vietnam
undertakes to timely publish information on tender, allow
sufficient time for bidders to prepare for and submit bids,
maintain confidentiality of tenders. The GPA in both agreements
also requires its Parties assess bids based on fair and objective
principles, evaluate and award bids only based on criteria set out
in notices and tender documentation, create an effective regime for
complaints and settling disputes, etc.
This instrument will ensure a fair competition and projects of
quality and efficient developing processes.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.