A positive business climate and an emerging middle class are propelling investors to look at Vietnam as a major destination for investments in the food processing industry, says the Ministry of Industry and Trade (MOIT).
Speaking at a recent investment forum held on the margins of Vietnam Foodexpo 2016 in Ho Chi Minh City, Deputy Minister Ho Thi Kim Thoa of the MOIT said the segment is in a growing phase with the domestic sector struggling to keep pace.
The food processing segment is super healthy, said Ms Thoa, adding that market analysts have forecast the industry will average growth rates ranging 5-6% every year in the foreseeable future.
The key influencers for the bright outlook are related to the fact that agriculture is the main source of income for over half of the Vietnam total population and the government is doing a lot to improve working conditions, innovation and productivity in farming.
In addition, the food processing industry in the country has access to an abundance of raw materials allowing the marketplace to offer a wide variety of products. Rising disposable incomes of households across the country are also a plus.
Notably, she said, there is an increasingly health consciousness driving demand for nutritious products that shows no sign of abating. Many market analysts have projected the organic food industry will grow threefold by 2020.
Bui Huy Son, director general of the Vietnam Trade Promotion Agency, in turn told the audience that food consumption has been projected to grow at an 18.6% clip annually through 2019.
Additionally, he said the Vietnam government has picked up the pace of equitization of State-owned businesses, which directly impacts opportunities for the food processing segment.
The State Capital Investment Corporation has stocks of more than 200 inpidual companies on the auction block, of which 50 are in the food industry. The Government getting out of the industry, presents a great opportunity for private businesses to jump in.
For his part, Dang Xuan Quang, deputy director of the Foreign Investment Agency, said the segment has attracted US$7.6 billion of FDI, which has been concentrated in areas such as handling, packaging, processing, transporting and marketing of food and agricultural products.
He noted the transnational companies that have invested in Vietnam have primarily been those based out of Thailand, Taiwan, Malaysia, Korea, and China with very little coming from companies in Japan, the US, Australia or the EU.
Lastly, Claudio Dordi, the technical assistance team leader of the European Trade Policy and Investment Support Project, noted the Vietnam-EU free trade agreement signed last year is set to come into force in 2018.
The new economic free trade region created by the agreement combined with the increasing demand for hygiene and food safety makes the segment a win-win for Vietnam and the EU.
He expects the food processing segment to blossom over the coming years and believes there will be an influx of investment from the EU.