Vietnam prospers in food processing industry, expects foreign investment

Jan 2, 2019

Experiencing rapid growth in food processing industry in last five years, Vietnam expects additional foreign investments for further expansion.

Minister of Industry and Trade Do Thang Hai said that Vietnam’s industrial production index rose by some 6.8% in span from 2013  to 2017 for the processed food industry and a growth of 9.7% for the drinks industry.

Vu Van Chung, the Ministry of Planning and Investment’s Foreign Investment Agency Deputy Head, informed media that the total foreign investment in Vietnam’s food processing  industry has touched US$11.2bn mark, spreading across to 717 projects excluding mergers/acquisitions which has not been accounted.

Favourable tax policies are the main attraction of Vietnam’s food processing industry to foreign investors. Technology related to production chains is completely tax-free.

Additional to tax policies, investors get an enterprise income tax i.e. 5% which is lower than conventional tax (25%). Priority-based projects are tax-exempt upto 4  years then have a 50% lower tax for following 9 years.

“The majority of investment funds have been channeled to the processing of seafood, beverages and agricultural produce, but currently faces a major obstacle in terms of domestic material supply, meaning that these materials end up being imported”, Chung said.

“Despite preferential policies for investors,  Vietnam’s food processing industry  has not been  able to attract investments from markets that strong  in this field, like Japan,  the U.S., Australia  and  the EU,” he added.

According to the Vietnam Ministry of Industry and Trade (MoIT), the production and processing sectors of confectionary, beverages, cooking oil and dairy are expected to grow to become the country’s most productive processing market segments.

 According to Hai, Vietnam’s annual food consumption makes up some 15% of its GDP, and with ready-to-eat food trends, is expected to expand further.

He also said that things look brighter the industry in coming days, especially after the free trade agreements signed by Vietnam come into  force that will throw open a wider consumer and investor market.

The said agreements are the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), amongst others.

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