Asian markets: the mission in Vietnam

Mechanization is the turning point for the modernization of the Vietnamese agricultural system, which has a great growth potential, but is still linked to a traditional type of production. The local mechanical industry is not able to meet the demand of agricultural machinery and equipment and for this reason the country approaches foreign technologies with interesting opportunities for the

The first Italian mission in Vietnam dedicated to the sector of agricultural mechanization closed in a successful way. To the initiative, promoted by FederUnacoma and ICE Agencies, took part eight Italian businesses of the agro-mechanical sector (Ama, Arag, Argo Tractors, Braglia, Celli, Cicoria, Faresin Industries and Selvatici), which had the chance to take contact with a market in which the Italian presence, although increasing, is still marginal (the import quota of Italian products is equal to only 2% of the total). The programme offered a rich variety of meetings, with a presentation workshop on the Vietnamese agriculture, 66 “B2B” meetings and a visit to some farms located in the Mekong River Delta, the agricultural capital of the country. From the mission, emerged the many lights of this framework – the Vietnamese primary sector offers huge opportunities of development, particularly linked to the shift from a traditional type of agriculture towards a market-oriented one and a production diversification, with the consequent valorization of horticulture and fruit farming – but also many shadows. On the other hand, the undersizing of farms (in the Mekong River Delta, the 85% of farms covers a surface of half a hectare), the low productivity of labour intensive cultivations, the difficulty of applying for adequate funding are factors that, together with the lack of a proper agro-mechanical industry, deprive Hanoi from best exploiting the potential and resources of the primary sector. Moreover, the Vietnamese fleet of machinery, which is mainly composed of second-hand and technologically old machines, is unable to contribute to cost and process rationalization.

In fields, manual labor is prevailing

A survey on the Vietnamese agriculture between 1986 and 2016, published by the ICE Agency for FederUnacoma, explains that Hanoi’s agricultural production scored a yearly increase of 4.1%. A relevant but still contained growth, if compared with neighboring countries, which had a higher level of development. In this framework, the Mekong River Delta represents a paradigm. This region, situated in the South-Eastern part of Vietnam, is the real agricultural core of the Country. Here are produced 24 million tons of rice, covering both the domestic demand and the export quota abroad (90%). But rice, besides being the main type of crop, is also that with the highest mechanization rate: in the Mekong River Delta are currently working 42,000 threshers, 2,800 harvesters and 600 combine harvesters. An important figure, which is anyway far from meeting the demand of agricultural technologies. “In the Mekong River Delta – states the Vietnamese Minister of Agriculture, mentioned by the ICE Agency – harvesters are used only in 1% of cultivations”. Even if the Delta is one of the most mechanized areas, manual labor still plays a decisive role especially in rice harvesting. For this reason, the costs of production (and, as a consequence, final prices) are still very high, while the quality of production (quite low) contributes to the degradation and loss of a remarkable part of crops. 

Manpower, which is wholly inadequate during peak demand (in the harvesting season) has its consequences on competitiveness. In fact, although the sector still today represents the main source of work and sustenance for the 65% of 94 million inhabitants (with the majority of population employed in the rice sector), it has to face the problems due to a process of fast urbanization. Mechanization would allow to relieve (but not solve) both problems. Indeed, (as stated in the survey) only one combine harvester would be able tocarry out the work of 60 people and cut production costs by 30%.

 

Agricultural machinery: Vietnam is looking beyond borders

The main factors in boosting development of the agro-mechanical sector in Vietnam are the lack of manpower, the technological gap, the lack of appropriate agricultural technologies and the valorization of horticulture. According to the last figures published by the Vietnamese Ministry of Agriculture, the local fleet of machinery is composed of 480,000 tractors, the 75% of which is composed of machines with less than 15 Hp. It is for this reason, that the mechanization rate, i.e. the average horsepower utilized per hectare is quite low, amounting to only 1.6 Hp. Such value is definitely inappropriate to exploit the real potential of the Vietnamese agricultural system and confirms the existence of a potentially lively and dynamic demand of agricultural technologies. However, local industry does not seem sufficiently equipped to meet this demand, not for a lack of active businesses in this sector (with 6,000 businesses including distributors, workshops and manufacturers) but rather for a lack of technological innovation. In fact, among these businesses, only few are able to assembly or produce machinery and equipment for agriculture. This explains the import’s explosive growth (with an average of +10% yearly between 2011 and 2016), that in 2016 scored the record figure of over 134 million euro with a peak for harvesters, harvesting machines, round balers and mowers. In the next future – as highlighted by the ICE Agency’s survey – the demand of agricultural technologies, pushed by an increasing crop diversification, should be concentrated on machines for plant-health treatments of rice and other cultivations, on seeders and sugar cane harvesters and finally on machinery for corn, peanuts and fruit cultivation.

 

A prototype business for the made in Italy:

he proposals of the Italian delegation

Almost all the import of agricultural technologies (87%) has actually benefitted Thai, Chinese and Japanese manufacturers. The made in Italy production, although remarkably increased as per export to Hanoi (at an annual rate of 43.9% between 2011 and 2016, until the value of 2.7 million euro in 2016) owns a residual share of the Vietnamese import. In detail, the demand concerns programmes for soil preparation and tillage, propulsion systems, tractors and spare parts. The main obstacle to the penetration of the Italian agricultural machinery in the Vietnamese market is due to the poor familiarity of Vietnamese farmers with our machinery. In addition, other structural obstacles are the lack of adequate financial instruments for the investment in mechanization or rural land fragmentation, but these are factors influencing not only Italian but also all foreign manufacturers. The barrier linked to the geo-morphological or crop peculiarity of the Italian agricultural machinery does not appear so crucial, as the adaptability of Italian machinery has always been a strong point. Given a type of agriculture, which is “hungry” for technology and characterized by many opportunities of penetration, FederUnacoma mission came forward with operative proposals in support of the made in Italy production in Vietnam. There are many ideas on the field, from the boost of agricultural cooperatives to services centers in charge of lending agricultural machinery to small farmers. Among other projects, the start-up of a pilot company with all-Italian technology, that could represent a real access door to Vietnamese agriculture for Italian manufacturers. Another idea consists in exporting to Ho Chi Minh the Eima Agrimach model, that achieved a huge success in India and could become a reference point for the ASEAN. In conclusion, the mission of the Italian manufacturers ended under the best auspices and turned Hanoi into one of the countries on which to focus the promotional plan developed by the ICE Agency.