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Completing policies on farm economy development
22/4/2011 15:5' Send Print

On February 2, 2000, the Government promulgated the Decree 03/2000/ND-CP on farm economy. After ten years of implementation, it is time to review and complete policies that were mapped out by the Decree to further develop the farm economy in the future.

The Decree 03 mentioned some groups of fundamental policies which have strongly influenced the establishment and growth of the farm economy in the past years. Besides successes recorded in the implementation of these policies, there remain certain weaknesses as follows.

Weakness of groups of policies

The group of policies on land

Points of view and policies on farm land that are expressed in the Decree 03/2000/ND-CP were institutionalized by the Law on Land promulgated in 2003 at Article 82 on land for farm economy. However, these regulations focus mainly on identifying the current use of land by farm owners and do not differentiate farm land from non farm land. The Decree does not clarify conditions and requirements that farm owners have to meet when they want to have access to land for developing farm economy. Neither does it stipulate state management and supervision of land use by farm owners. There are not clear sanctions against land accumulation not for the purpose of production. These have given rise of several problems.

By now, only 45% of the total number of farms has received certificates of land use. The remaining 55% have not yet been given certificates. The area of the farms which have had certificates account for 30% of the total areas of all the farms put together.

First, farm owners’ rights to land use are not aligned with the Law on Land because their farm land is of different categories. Some pieces of land are allocated free of charge, others are rented, transferred, bid or self-reclaimed land. In such a context, the issuance of certificate of land use to each category of land is not complete or very slow. This has discouraged farm owners to make long-term investment. Another reason that has disheartened farm owners is that they have not yet given Land Certificates to use as collaterals to ask for bank loans. (1)

Second, most of land fund for production has been allocated to farmers as stipulated by the Law on Land. The remaining land areas in local areas are limited and not enough to establish farms. In order to set up farm, land must be retransferred from households. However, this is very difficult things to do as farmers have not yet moved from agriculture production to other economic activities.

Third, some farms have not invested in agriculture but have been engaged in other economic activities such as building houses, and restaurants, renting out or transfering to others for benefits.

Group of financial policies on farm

In realizing the Decree 03, the Ministry of Finance issued the Circular 82/2000/TT-BTC regulating in details financial preferential policies for farms. Nevertheless, results have

It is a common practice that the land allocated to farms (especially those located in the outskirts of cities, alongside roads, near tourism sites and recreation centers) has not been properly used. This has cause adverse impacts on the policies of developing farms as stipulated in the Decree 03 of the Government.

fallen short of expectation.

First, preferential treatments on use taxes and rents of land and water surface for agricultural production are only applicable to farms which put vacant, fallow and unconsolidated land into production. Only few farms fall into this category. Meanwhile, land of most of the farms are retransferred by farmers or rented from farmers who are allotted with the land for long-term use. Thus, the number of beneficiaries of these preferential policies is few. Hence limited effectiveness of the policies.

Second, farms are entitled to reduction of enterprise income tax. But, farms have not yet operated as enterprises as they have not yet registered for businesses, have not been able to calculate taxable income, and so can not benefit from this policy. The training on calculating enterprise’s income taxes to farms has been hampered by the farms’ unable to fully account for their revenues and spending.

Group of policies on investment and credit.

Though these policies manifest high attention of the Government towards farms, there are drawbacks, particularly with large-size farms of more that 10 ha upward.

First, demands for capital in the first stage of development are often high. But at this stage, farms have not yet products for sale, especially those farms which grow perennial trees. As this factor has not yet taken into account, credit policies have not yet helped farms overcome difficulties in the first stage of capital construction.

Second, when farms have available products for sale, they are faced with risks such as natural disasters or endemics and unprecedented changes of market. Some have fared badly and become default on their credit and loans. The current credit policies have not year assisted farms to mitigate these risks hence demands for credits by farms are limited though credit organizations are capital for loans.

Third, cumbersome procedures and contracts for loans, loan durations and sizes are factors that hamper farms’ access to loans from banks and credit organizations. The root cause to this situation is the contrast in interest of farms and banks and credit organization. The latters have not received sufficient policy assistance to ensure their profits from loans that they provide to farms, particularly when farms face risks.

Group of policies on market

In these areas, there are several limitations from both farms and state agencies. Most common are:

First, farms are not concentrated geographically and are located far from each others. Those in mountainous or out-of-the way areas have not been able to access to assistance from trade promotion programs.

Second, farms themselves have not yet proactively partnered to sell their products while state policies have not yet paid due attention to promoting farm partnership in product distribution, maintaining and expanding markets in the region and in each area.

Third, there are no policies on assisting farms to establish market for each kind of product or for each production areas.

Fourth, the State has not played an active role in linking farms to market. It seems that policies on farm product market have concentrated on solving fluctuation of farm product prices and yet on long-term and stable market orientation.

Some solutions to further improve important policies on farms

Land policies should be improved as follows:

First, to develop clear and concrete planning of the size of agricultural land for farm economy. The land should be concentrated and suitable to each kind of product. Farms must be of appropriate sizes.

Second, to identify the optimal production scale for each plant, breeding animal. The farms are capable of applying the Vietnamese criteria (Viet GAP).

Third, to encourage farmers voluntarily change and transfer land so as land will be concentrated and jobs will be created for farmer household which assign land to other households.

Fourth, to specify responsibilities of local administrations in managing transfer and assign of land in the areas planned for commodity production under the state management and regulation.

Land use transparency of farms should be a must for continued management of farm economy development, including issuance of land use certificates, clear identification of duration of land use and financial obligation over land areas which are being used but farms.

Financial policies

To create favorable conditions for farms to accumulate capital and make self investment, the financial policies:

- Do not impose enterprise income taxes on farms which have not registered to operate under the Law on Enterprises;

- Levy income taxes on farm owners having high income as stipulated by the current Law on Personal Income;

- Exempt and reduce personal income for farm owners’ income which is used to invest in farm expansion and depth investment;

- Levy taxes on farms’ property as stipulated by Law;

- Exempt and reduce fees and charges for farms on their economic and civil transactions;

- Exempt and reduce fees that farms have to pay for their business and development consultancy.

Policies on capital assistance

Farms have generated approximately 50% of capital needed for investment. To effectively assist farms, following measures are to be taken:

- To expand assistance from the state budget. The state should invest in developing infrastructure for areas planned for farm establishment.

- To regulate in detail policies on loan, and to ensure that credit policies are more suitable to each farm’s conditions. To encourage banks and credit organizations to provide loans to farms’ projects not on the conditions of property guarantee but on the conditions of the farm’s business performance.

- To develop borrowing projects by large and concentrated production areas. Priority is to be given to farms which have already received large investment and had high property value and need capital to complete the investment.

On market policies

Policies on market for farms should be improved as follow:

- To establish the system of trade promotion for each product and for each concentrated production zone in provinces and inter-provinces.

- To consider cooperation and collaboration in farm product distribution as social responsibilities of farms when they are entitled to market promotion policies.

- To set up market promotion organizations in each farm production zone to transfer information on market, prices and forecast of demands for products of farms in each region. /.
(1) Report of the project “A Study on management of large-size private farms and major solutions on farm development”. Project Manager. Dr. Hoang Trung Lap, the Institute on Agricultural Planning and Designing, Ha Noi, February 2006.
Chu Tien Quang