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COVID-19 and the chance to promote agriculture digitalization

COVID-19 and the chance to promote agriculture digitalization

Friday 03, 04 2020
During the economic downturn caused by the COVID-19 epidemic, many agricultural enterprises have to borrow "black credit" to maintain their financial resources

Meanwhile, there are businesses still growing production and exports in the first quarter of 2020, proving that COVID-19 has created risks but also created opportunities for agricultural production enterprises to change comprehensively.

Identify opportunities from agricultural digitalization

"Digital transformation is an important factor to boost production in the period of disease prevention, ensuring essential products for society and increase exports," said Truong Gia Binh, Head of the Private Economic Development Research Committee (Board IV) of the Advisory Council on Reforming Administrative Procedures (established under Decision No. 1463 dated September 29, 2017, of the Prime Minister).

Mr. Binh, also the Chairman of the Digital Agriculture Association (VIDA), at the first VIDA online conference to find solutions to remove difficulties for agriculture, said: “All agricultural production enterprises understand that, in the general difficulty of the COVID-19 pandemic, agriculture remains an economic opportunity with great opportunities as it is an essential commodity needed by every country”.

VIDA members strive to ensure essential products for society and are ready to apply advanced technology solutions (such as e-commerce solutions) to operate the supply chain flexibly and ensure goods circulation during difficult times.

However, in order to turn risks into opportunities, it is important to understand that the agriculture sector is facing huge challenges.

VIDA conducted a quick survey on 23rd and 24th March with 50 small businesses (via phone calls and online surveys of business owners), showing that there was an inventory of more than 48,000 tons of products and 10 thousand liters of organic and chemical fertilizer, equivalent to 410 billion VND.

However, half of these are inventories of timber, and the majority of the remaining goods include agricultural products, vegetables, rice, etc. which means that for agricultural production, the output is still quite good.

COVID-19 and the chance to promote agriculture digitalization

Notably, according to Mr. Phan Minh Thong, General Director of Phuc Sinh Group, who has more than 20 years of experience in agricultural product export, due to early identification of risks from the COVID-19 disease, since the beginning of 2020, the company has planned to shift to small and medium customers in the world, regardless of a number of large customers.

In addition, since the previous years, Phuc Sinh has conducted digitalization of distribution channels, which has helped the business system of the Group operate quickly, adapting to the requirements of working online, without the need for headquarters.

“Chinese partners have implemented preventive measures, warned and told us about how to prevent epidemics so our export activities through this market still grew 120-130% in the first quarter of 2020”.

The head of Phuc Sinh Group said that to overcome the COVID-19 epidemic, the way of corporate governance to cope with difficulties and challenges should be a top concern.

"This is the time to reform enterprises," Mr. Thong shared. According to Mr. Vu Manh Hung, Chairman, and CEO of Hung Nhon Company, specializing in agricultural processing (of pork), the company's staff of about 1,400 people still receive enough salaries, bonuses and work in strict compliance with the regulations on the COVID-19 disease control measures. The company is still working at 100% productivity and yield on a 100-hectare farm.

Every day it sells 100 tons of goods and consumes 1 million eggs per month. In order to ensure the life of workers during the epidemic season, the company has a KPI (work efficiency) bonus regime for workers in cash, in parallel with the restructuring of some parts.

Mr. Nguyen Manh Hung, Chairman of the Board of Directors of Nafoods Group, is most concerned about the working capital when banks tighten their pockets and do not extend debts.

Mr. Hung said that there were businesses that borrowed with exorbitant interest rates from black credit channels: for every 1 million VND, the interest rate was 3,000 VND to 5,000 VND/day, equivalent to the interest rate of 9-15% each month, and of 109.5-182%/year.

Thus, even in agriculture, the health and resilience of each business are completely different, and taking advantage of or being deprived of opportunities during the COVID-19 era requires different adaptive solutions.

Requirements for forming a modern distribution channel

Mr. Nguyen Quoc Toan, Director of the Department of Processing and Market Expansion (Ministry of Agriculture and Rural Development) shared with the VIDA members remarkable information: By the end of the first quarter of 2020, the export turnover of agricultural products reached 9.06 billion USD, equivalent to that of the same period last year, but in the coming months it will be reduced as more difficulties appear.

Currently, the US is leading the import market of Vietnamese agricultural products with 23.2%, followed by China (21.4%), Japan, and South Korea. Toan said that this is also the best time to digitize agriculture.

He made the recommendation that VIDA should coordinate with The State management agencies on production control, inventory of goods, etc. to regulate the market supply and avoiding imbalances, following with traceability control and replication of the e-commerce model to change consumer habits.

In fact, after a market survey in Lang Son, conducted by the Ministry of Agriculture and Rural Development and the Chinese Embassy in Vietnam, the most optimistic prediction is that by June the export of agricultural products to China will recover, and that to the European markets will be a few months slower.

Therefore, from now on, domestic agricultural enterprises must prepare the goods sources and take steps to digitize the production and distribution process. Mr. Phan Thai Trung, Director of Farmers Company, said that this business had implemented a method of delivering food in cabinets located in apartment buildings, and goods are kept cool.

Condominium residents could use the QR code to open their mailboxes, pick up the items they order and pay in cash or bank transfer. These cabinet models are easy to replicate during the epidemic season.

The representative of Sendo Group, a large e-commerce distribution channel, also said that there are no sales fees on Sendo for agricultural products and foodstuffs, as it is the Group’s way to join hands with businesses in this difficult period.

Dr. Nguyen Thanh My, Chairman of the Board of Directors of Rynan Company (Tra Vinh), which is also an enterprise applying the innovative idea of improved gas packaging technology, helping to preserve pork for 7-12 days (Masan's Dehli cool meat product), also affirmed that Vietnam surely had a chance to develop, grow and overcome difficulties during the epidemic stage.

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