Vietnam sugar industry in dire strait

Minh Thu - Jun 04, 2019 | 03:31 PM GMT+7

TheLEADERThe local sugar industry is facing a great deal of difficulties as the ASEAN Trade in Goods Agreement is going to take effective from 2020 onwards.

Vietnam sugar industry in dire strait
Vietnam’s 2018–2019 sugarcane crop is in its third consecutive year of being affected by unfavourable weather conditions

Vietnam’s 2018–2019 sugarcane crop is in its third consecutive year of being affected by unfavourable weather conditions, resulting in poor sugarcane yield, low prices and weak market demand.

Data by the Vietnam Sugar and Sugarcane Association (VSSA) showed that the industry has witnessed the sugar inventory at its record high of 650,000 tonnes as at present. There are 17 out of 30 sugar factories have made losses. Many of them, meanwhile, ought to halt their production at this stage and some could sooner or later go bankruptcy as there is not enough raw material for their sugar production.

According to National Assembly delegate of Tra Vinh province Thach Phuoc Binh, the southern province’s sugarcane field has now been dramatically shrunk from some 4,500-5,000 hectares down to 3,500 hectares as a result of steep price fall of sugarcane. Sugarcane farmers have thus turned their back on the plant and switched to other profitable crops or aquafarming.

The total sugarcane cultivation area in Vietnam, as VSSA revealed, has gone down by 30-60 per cent compared to previous years.

The local sugar sector, meanwhile, will soon face another obscurity in terms of the reduced barriers for ASEAN members to enjoy free flow of goods within the region, in line with the ATIGA commitments which is due to come into force on January 1, 2020.

Through ATIGA, Vietnam and some other countries will have their import duties reduced to 0-5 per cent on 98.86 per cent of their tariff lines, including sugar.

The cheaper imported sugar, in this case, will do more harm than good to the local sugar production.

Chairman of Son La Sugarcane JSC Dang Viet Anh said that the local sugar production is not inferior to any regional markets. Thailand, for instance, has its sugarcane cultivation capacity reaching 72-75 tonnes a hectare, not very much higher than the 70 tonnes a hectare produced in Vietnam’s remoted areas. Should regional integration take place effectively, Vietnamese sugar enterprises can definitely compete fairly with Thai sugar and there is perhaps little to no market for foreign sugar to beat local one.

The high price of Vietnamese sugar, compared to Thai sugar, meanwhile, is said to come from the unfair competition that arrives in various forms of trading fraud, high tariff rates, and commodity support programmes, which have for long taken place in a sophisticated and systematic manner.

According to the American Sugarcane Association, the Thai government has spared at least $1.5 billion to subsidise their sugar industry, equivalent to $0.13 a kilogram of sugar produced in the entire country.

Such government support has prompted illegal imports of Thai sugar to Vietnam to take advantage of the cheaper prices. In the past two years, one third of local sugar producers have to close down as they cannot put up with the unfair competition

Appropriate solutions to save the local sugar industry, according to economist Nguyen Minh Phong, could include the same protection programmes that other countries have employed.

For the smuggling issue, Phong noted that the local government should come up with strict regulations to make both individuals and organisations responsible for their smuggling activities

At the same time, there should be a proper planning to stabilise the local sugar industry with due support to protect sugarcane farmer from plants to consumption and exports. Exploiting opportunities in the field of biomass energy for cane trash and bagasse is also another way to support sugarcane farmers.

In addition, Anh of Son La Sugar stressed that the local authorities must thoroughly calculate and analyse the implications of the implementation of ATIGA on the interests of the whole nation, farmers, workers and businesses involved in the sugar sector.

A five-year preparation for local sugar businesses to restore their sugarcane field, stabilise their production and reinstate their position in the global sugarcane industry, particularly against Thai sugar, is thus suggested.