Changing the investment climate in Viet Nam's poor rural areas

Release number IFAD/02/08

$US35 million loan signed by IFAD President in Viet Nam to expand market access and develop businesses for small farmers in Mekong Delta.

Hanoi, January 18 – Vietnam's rural poor must be given the chance to place their products on the national and global supply chain if extreme poverty is to be eradicated in Vietnam, said Lennart Båge, President of the International Fund for Agricultural Development.

As one of the fastest growing economies in the world, Viet Nam has cut poverty from 60 per cent to 20 per cent in little over a decade.

Extreme poverty still exists however especially in rural areas where 45 per cent of people still live below the poverty line compared with nine per cent in the cities

"The government of Viet Nam has made remarkable progress in reducing poverty even in rural areas" said Båge, speaking during an official visit to Hanoi.

 "One of the ways to ensure that poor rural people also benefit from this phenomenal growth is by creating the right market conditions for private investors in agriculture and their cooperation with farmer households."

In Viet Nam as elsewhere, poor farmers, smallholders and other rural households might not know, or be able to increase their incomes from the commodity value chains through processing or negotiating with the wholesale customers who are in a position to obtain fairer prices for them for their agricultural products.

And even if they can, they don't always have the means to meet the bio safety requirements of large international food purchasers such as supermarket chains.

The IFAD President spoke after signing a $US35 million loan agreement and a US$550,000 grant with the government of Viet Nam to assist the poor households in Ben Tre and Cao Bang provinces in developing market-based agricultural production and business.

The project ‘Developing Business with the Rural Poor Programme' will bring IFAD's total loan commitment in Viet Nam since 1993 to $US168.3 million.

The programme focuses on improving the local investment environment, developing rural businesses, and expanding market access for poor rural people so that they are better positioned to gain the added value from their produces. About 44,400 households in Ben Tre and 55,200 in Cao Bang are set to benefit from this programme.

Båge is the first UN agency head to visit Viet Nam since the south-east Asian nation took up its seat at the UN Security Council on January 1.

During his visit, Båge also signed the official agreement with the government for IFAD to establish an office in the country as part of the One UN project. Viet Nam is one of the pilot nations of the UN reform process that aims to increase inter-agency cooperation and efficiency.

Båge also met with key government officials who presented the IFAD President with an Agricultural Medal for his agency's services to the country. Discussions with the Government included IFAD's vision for reducing rural poverty and the effects of climate change and possible measures for mitigation and adaptation in Viet Nam.

Viet Nam is highly prone to a range of natural disasters and climate change impacts including floods, typhoons, droughts, mudslides, and salinity intrusion. The average economic loss from natural disasters is estimated to be US$200 million a year.

"The Government of Viet Nam is to be lauded for its recognition of the role of the rural poor as custodians of the natural resource base in its National Socio-Economic Development Plan" said Båge.

"The key is to now help them by investing in technology and financing to halt land degradation and deforestation whilst at the same time increasing wealth in rural areas where the vast majority of the country's poor live." 

IFAD was created 30 years ago to tackle rural poverty, a key consequence of the droughts and famines of the early 1970s. Since 1978, IFAD has invested almost US$10 billion in low-interest loans and grants that have helped more than 300 million very poor rural women and men increase their incomes and provide for their families.

IFAD is an international financial institution and a specialized United Nations agency. It is a global partnership of OECD, OPEC and other developing countries. Today, IFAD supports more than 200 programmes and projects in 84 developing countries.