How should overseas agricultural investment proceed? The official report has set the tone
Economic Observer reporter Jiang Yunzhang
A "Research Report on Chinese Enterprises' Overseas Agricultural Investment" (hereinafter referred to as the "Report"), jointly completed by more than ten ministries and commissions including the National Development and Reform Commission, the Ministry of Finance, the Ministry of Agriculture, and the Ministry of Commerce, is about to be released. Shortly afterwards, relevant departments will roll out a series of policies and measures to encourage and support agriculture in "going global."
It is learned that from the establishment of the research team in early 2012 to the initial formation of the above-mentioned report at the end of last year, a total of 29 provinces (autonomous regions and municipalities directly under the Central Government) provided detailed data on overseas agricultural investment. Not long ago, the National Development and Reform Commission, the Ministry of Agriculture and other parties invited some experts, scholars and enterprise representatives to gather together to further discuss the revision and improvement of the report, hoping to release it as soon as possible.
After the report is released, at the national policy level, a series of policies and measures are expected to be introduced to encourage and support Chinese enterprises to invest in agriculture abroad, including simplifying the import approval procedures for overseas agricultural enterprises for the three major staple grains of rice, corn and wheat, and increasing financial support for overseas agricultural enterprises. Among them, large agricultural enterprises, especially large state-owned grain enterprises, will still be the focus of state financial support.
International layout
The Economic Observer learned from relevant departments that from 2001 to the present, China's overseas agricultural investment and cooperation has spread to more than 100 countries and regions, and there are more than 600 enterprises investing in agriculture overseas. Among them, Asia is the region with the greatest concentration of Chinese enterprises' overseas agricultural investment, followed by Africa, Europe, Oceania, North America and South America.
In recent years, central state-owned enterprises led by COFCO Group and China National Agricultural Development Group, and local state-owned enterprises mainly including Chongqing Grain Group and Heilongjiang State Farms, have all made considerable progress in overseas agricultural investment. On the central enterprise side, after successfully acquiring 99% of the shares of Australia's Tully Sugar Limited in 2011, COFCO Group spent 2.8 billion US dollars this year to successively acquire the Netherlands' Nidera Group and Noble Agri Limited under Hong Kong, China's Noble Group, holding 51% controlling stakes in both groups. Among local state-owned agricultural enterprises, since 2010, Chongqing Grain Group has invested several billion yuan to build soybean bases in Brazil, Argentina and other places, involving multiple links such as planting, warehousing and port logistics. During the "12th Five-Year Plan" period, state-owned agricultural enterprises such as COFCO Group, China National Agricultural Development Group, Chongqing Grain Group and Heilongjiang State Farms all had targets and plans for overseas investment. COFCO mainly aimed to expand businesses such as soybeans, cassava, alcohol and sugar through mergers and acquisitions and other means; China National Agricultural Development Group focused on developing agricultural, fishery and other resources in Africa, South America, Australia and Southeast Asia; Chongqing Grain Group planned to invest a total of more than 17 billion yuan in Brazil to expand its soybean base; Heilongjiang State Farms planned to expand "overseas reclamation areas" of more than 40 million mu in Russia, Brazil and other countries.
In addition to state-owned enterprises, private enterprises such as Tianjin Julong Group, Zhejiang Kasen Group, Qingdao Ruichang Cotton Industry Company and New Hope Group have also begun to develop overseas agricultural investment on a certain scale. Tianjin Julong has planted more than 100,000 hectares of oil palm trees in Indonesia, and its annual palm oil output accounts for 20% of the local market; Zhejiang Kasen owns a 270,000-mu soybean planting farm in Brazil; Qingdao Ruichang Cotton Industry can produce more than 100,000 tons of seed cotton in Africa each year; New Hope expands at least 8 agricultural and livestock enterprises abroad every year.
Although leading agricultural enterprises such as COFCO have increased their overseas investment, overall, among the more than 600 overseas agricultural enterprises, small and medium-sized enterprises still account for the vast majority. From state-owned to private enterprises, the proportion of leading agricultural enterprises is still noticeably small. Compared with grain giants in developed countries such as the United States and Japan, state-owned enterprises such as COFCO Group and Chongqing Grain Group still have very limited influence on the international grain market.
Statistics show that the average overseas agricultural project investment of developed countries such as the United States and Japan is 6 million US dollars, while that of developing countries is about 2.6 million US dollars, and China's is currently only 1 million US dollars. According to an analysis by Hu Hengyang, inspector of the Department of Rural Economy of the National Development and Reform Commission, the main reason behind COFCO Group's acquisition of two major international grain traders in succession within just one month this year is related to the central government's strong emphasis on the food security strategy.
Regarding the national food security strategy, the specific goal set by this year's No. 1 Central Document is "basic self-sufficiency in grains and absolute security of staple food." As for how to advance agriculture in "going global," the central government also made it clear that it is necessary to cultivate large enterprises in grain, cotton and oil with international competitiveness, and support mutually beneficial agricultural production and import-export cooperation abroad, especially with neighboring countries.
Financial support
In the research conducted by the National Development and Reform Commission, the Ministry of Finance and other parties on overseas agricultural enterprises, including state-owned enterprises, the issues most frequently reported by the vast majority of enterprises were funding constraints and excessive approval procedures.
In terms of funding, overseas agricultural projects generally face problems such as high development costs, large capital input and long payback periods. In addition, they must also face risks in international markets and international politics. The combination of multiple factors has hindered the rapid development of China's overseas agricultural enterprises.
Shi Kerong, chairman of Hebei Hopefull Grain & Oil Group, said that the scale of policy-based loans provided by the state to overseas agricultural enterprises is very small, and they are mainly concentrated on a small number of state-owned enterprises, making it difficult to solve the loan difficulties of most overseas agricultural projects. He hopes that overseas agricultural loan policies can also be tilted toward private enterprises.
At present, China's overseas investment by enterprises is mainly managed by the National Development and Reform Commission, the Ministry of Commerce and foreign exchange management departments. The specific division of labor is that the National Development and Reform Commission is responsible for approving overseas investment projects, the commerce department is responsible for approving the establishment of enterprises for overseas investment, and the foreign exchange management department is responsible for foreign exchange management of overseas investment. State-owned enterprises' foreign-related investment also needs approval from the State-owned Assets Supervision and Administration Commission.
A number of companies investing in agriculture abroad said that in recent years, although the National Development and Reform Commission and other parties have promoted the facilitation of overseas agricultural investment by simplifying procedures and relaxing restrictions, relevant departments have still not formed a coordinated management mechanism. Each institution still proceeds from its own jurisdiction, bringing many inconveniences to enterprise investment and restricting the pace of enterprises "going global."
Regarding the problem of funding constraints, an official from the National Development and Reform Commission said that in late April 2011, the National Development and Reform Commission and the Ministry of Finance jointly issued the "Notice on Doing a Good Job in the Application Work for the 2011 Special Fund for Foreign Economic and Technical Cooperation," making it clear that the state focuses on encouraging enterprises to develop cooperation in agriculture, forestry and fishery abroad, and provides support of up to 30 million yuan through direct subsidies and loan interest discounts; in May 2013, the National Development and Reform Commission and the Ministry of Commerce jointly issued the "Notice on Issuing the Guiding Opinions on Encouraging Overseas Agricultural Investment Cooperation," making it clear that several central enterprises with overseas agricultural investment cooperation as an important business will be cultivated in a targeted manner.
The Economic Observer also learned that the previously complicated inspection and quarantine procedures for the three major crops of wheat, rice and corn grown by Chinese enterprises on leased or purchased land abroad when shipped back to China will be simplified in the next step to reduce enterprise transportation costs.