Doing Business

A growing era of agricultural digitalization in Vietnam

Trường Lăng

December 7, 2022

Doing Business

A growing era of agricultural digitalization in Vietnam

Trường Lăng

December 7, 2022

Over the past decades, agricultural digitalization is growing in popularity thanks to its potential in boosting productivity and providing consumers with greater transparency in the production process.

Many experts believe that rapid digital transformation is the best way for Vietnamese agriculture to recover and develop in the post-pandemic period, affirming its role as one of the key pillars of the country’s economic growth. Amid challenges from climate change, market fluctuations, and changes in consumption trends, digitalization is expected to open up a new era for the sustainable development of Vietnam’s agriculture industry. 

Current market performance

GDP Contribution of the Agriculture, forestry, and fishing sector in Vietnam from 2011 to 2021. Source: Statista

The latest report released by Statista in October 2022 reveals that agriculture accounted for 12.56% of the country’s GDP in 2021. The sector also provides 39.45% of the total employment in the country. With the growing digitalization trends, the invention of more innovative tools by agritech startups to sustain food security in Vietnam is no longer far-fetched.

Scope of digital implementation

At present, Vietnam’s agritech industry is still lagging behind other countries in spite of its status as an agricultural nation. Even with its large number of small to medium-scale farming households, the number of agritech companies and projects is still limited. 

Up to this point, the country has 12 areas certified for hi-tech agriculture. The three most prominent zones include Hau Giang, Phu Yen, and Bac Lieu.  

In addition, more than 20 enterprises in the Central Highlands of Vietnam have already applied agrotechnology in their operation and farming, which is linked with computers, smartphones, and electronic traceability systems.

Together with domestic investors, foreign agricultural companies also play a crucial role in shaping the agritech sector in Vietnam. The German corporation Bayer Global and Thai-based conglomerate Charoen Pokphand are currently setting their name as one of the top strategic investors to local enterprises. 

Key market players

Vietnamese agricultural enterprises are constantly promoting the application of high digital technologies in production and processing to contribute to restructuring the agricultural sector. 

As of now, Demeter, MimosaTEK, Sero.ai, and Naturally Vietnam are considered to be among the leading enterprises in the market.

Demeter

Demeter was founded in 2017 by Pham Ngoc Anh Tung after executing a $4.4 million USD agriculture project in Ho Chi Minh City. The company initially developed an IoT-driven system at Cau Dat Farms, with support from several international farms. The system enables farmers to automate their operations and effectively manage their farm sites through cloud data storage that provides necessary information about weather, soil quality, etc. 

MimosaTEK

Known as the only company in Viet Nam listed by CBInsight in a group of 100+ global technology companies that are contributing to a better future of agriculture, since its inception, MimosaTEK has been focusing on utilizing precision agriculture to enhance existing farming practices in Vietnam, most of which are experience-based and manual. 

In recognition of its innovative solution, in 2017, MimosaTEK was rated as 1 of 10 companies globally to receive the Securing Water for Food Award granted by USAID.

Sero.ai

Sero.ai is an AI-driven agritech startup that helps farmers tackle the challenges of erratic crop production by creating a platform that connects farmers and experts together. Farmers are encouraged to take photos of their sick plants and upload them to the platform. Computer vision technology helps users identify the disease and give recommendations on suitable solutions.

Naturally Vietnam

“Naturally Vietnam” is a Hanoi-based agritech startup working towards the mission of bringing more transparency to the food market. The company provides an online grocery platform where consumers can purchase traceable food products sourced from six farms in the Soc Son district of Hanoi.

The company also offered seed capital of over $2,000 USD to help individuals build farms from scratch to ultimately be able to bring their produce to the e-commerce platforms.

Needless to say, existing agritech startups in Vietnam are paving the way by using their current innovations to transform farming practices. And in an effort to stay ahead of their Southeast Asian competitors, many of these companies are constantly looking to expand their business scope even beyond the country’s borderline. Indeed, the future ahead for these Vietnamese agritech startups is one that is promising.

Vietnam’s agriculture future roadmap

Government-backed incentives and policy

Prior to the pandemic, there already existed regulatory frameworks that support the digitization of agriculture in Vietnam, despite being quite fragmented.

When the COVID-19 pandemic broke out in Vietnam in early 2020, it placed several burdens on agriculture, particularly weakening the purchasing power and causing serious disruptions in supply chains.

6 months later in June 2020, the Vietnamese Prime Minister signed off Decision No. 749/QD-TTG issuing “Vietnam’s National Digital Transformation Program towards 2025, with a vision to 2030” which defines agriculture as one of eight priority sectors for digital transformation in the country. Accordingly, the Government aims toward:

  • Developing hi-tech agriculture with a focus on smart agriculture and precision agriculture, increasing the proportion of digital agriculture in the economy.
  • Conducting digital transformation in agriculture based on data, focusing on the development of large information systems such as those of land, crops, livestock, and aquatic products. 
  • Establishing a network of integrated aerial and ground observation along with promoting the provision of timely information on the environment, weather, and soil quality to the farmers; supporting the sharing of agricultural equipment through digital platforms.
  • Applying digital technology to automate production and business processes; managing and supervising product supply chains and origin, ensuring timeliness, transparency, accuracy, and food hygiene and safety. 
  • Testing the idea of “every farmer is a trader, every cooperative is a digital enterprise” with the aim of encouraging farmers to apply digital technology to agricultural production, provision, distribution, and prediction; providing training in such application and promoting the development of e-commerce in agriculture.
  • Robustly digitizing management activities to promptly adopt agricultural development policies and guidelines.

In addition to that, in February 2021, the Prime Minister approved Vietnam’s plan to restructure the agricultural sector for the 2021- 2025 period (Decision No.255/QD-TTG). The plan acts as a supporting foundation to foster smart, modern, clean, and sustainable agriculture through the application of high technology, digital technology, and information technology in all stages of the value chain. 

Besides, Vietnam’s accession to various free trade agreements (especially CPTPP, EVFTA, and, RCEP) and the government’s tax incentives are also opening up countless opportunities for local exporters of agricultural produce to participate in global value chains, attracting more investment, and advance the local farmers’ technological knowledge and skills.

Emerging investment trends

Recent years have seen an increasing trend of Vietnam cooperating with other developed countries in the process of transforming agriculture through digital applications.

Some of the most promising opportunities include the IoTs (Internet of things), smart farming, machinery and software, genetic and breeding, and pest management. Low cost, simplicity, and efficiency will enable companies to succeed in the agritech sector in Vietnam.

IoT (Internet of Things) 

Both foreign and domestic firms are interested in investing in IoT and blockchain because the entry barrier and investment is relatively low.

Since Vietnamese farmers are predominantly operating in small to medium-farming households, affordable and adaptable solutions to increase production efficiency without significant investment are the top priority.

Several local startups in agritech have already been applying IoT in the production process. 

For example, MimosaTEK, one of the most successful startup agritech companies, has offered IoT-based management services to develop an information platform to enhance the livelihoods of farmers through the transformation of experience-based farming activities into information-driven activities.

Foreign investors eyeing this subsector may face fierce competition with local companies since most agritech startup firms are operating within this field. Apparently, domestic firms seem to have more advantages in terms of proximity to the customers and understanding of the local market.

Smart farming

At the moment, some foreign investors that are eyeing this sector in Vietnam include Enzootic (Israel and Hong Kong), GoodHout BV, SmartFarm Co Ltd, FairAgora Asia (Thailand), GAGO (China), Intello Labs (India), Pycno Industries (Australia), Gintel (Taiwan), and Fluence corporation-NIROBOX (Israel).

Since smart farming requires a comprehensive approach from the most basic step of seed planting to post-harvest and product distribution, it may take foreign companies longer to enter a new market. However, they can totally navigate this challenge by collaborating with local companies, who know the market well enough like the palm of their hands. This way, investors can take full advantage of their cutting-edge technology without worrying too much about being off-track with what’s happening in the local market.    

Challenges ahead the road

However, even when the Vietnamese government did introduce numerous policies and regulations to promote the application of high tech in agriculture, many domestic and foreign companies still face hindrances.

The first problem has to do with the lengthy procedures to import supply chains and equipment to Vietnam.

The second is the lack of transparency in incentives, weak physical and legal structure, as well as poor management of agricultural input and output.

This results in challenges for foreign firms that have to navigate their strategies when expanding to Vietnam.

Mr. Le Vu Minh, Strategic Consulting Director of FPT Corporation pointed out that many Vietnamese agricultural products ranked top in terms of output, such as rice and coffee, but fall behind in terms of value per volume and productivity per production unit.

“With that being said, it is now the right time to develop the growth and value of the agricultural industry, making them no longer rely on output, but rather on production with digital transformation as a supporting position for the economy,” he added.

Creating the future of investment

Without a glimpse of doubt, Vietnam’s agriculture is at a turning point. The industry remains an important part of the country’s economic development due to its rising significance in global food security questions. Sustainable agriculture and value chain development are thus, strategic priorities in the years to come and it is anticipated that the private sector will play an important role in fastening the process.

With that being said, if you’re still looking for a safe set of hands to help you take a step further into Vietnam’s agriculture market, connect with Viettonkin for more in-depth, up-to-date, and personal investment advice. Here, we gather a community of reputable consultants, with highly developed communication channels along with a network of diverse connections of domestic and international businesses. Contact us now to enhance your chance of business success! 

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