Sugar cane waits for rescue

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Many sugar factories are falling in to a serious difficult status

Everlasting unmarketable status

According to Pham Quoc Doanh, Chairman of Vietnam Sugarcane and Sugar Association: Currently, the sugar industry is faced with extreme difficulties. While the 2018-2019 crop started more than two months ago, the stockpile of the previous crop is still 200,000 tons. Earlier, during the last months of 2017, sugar consumption was slow because partners stopped importing, looking forward to the implementation of the ASEAN Trade in Goods Agreement (ATIGA). From 1st January 2018, import tax rate of sugar from ASEAN countries reduced to 0%. At the present time, the consumption situation is not good. Due to the fierce competition, many factories had to sell sugar under the price, but still suffer from unmarketable status. Although, the factories are facing many difficulties, they still have to maintain the buying price of sugarcane for farmers in the 2016-2017 crop because local governments do not permit price cutting. In the current situation, some factories have to stop their production, "Mr. Doanh said

In addition to the unmarketable status caused by ATIGA, the domestic sugar industry is still "sitting on the fire" by the competition of temporarily imported sugar for re-export. In fact, in the context of difficult domestic consumption, opening the door to export to China is an important solution. From 2012, China has allowed Viet Nam to export sugar through the Ban Vuoc border gate in Lao Cai province. According to the Vietnam Sugarcane and Sugar Association, the export was relatively smooth in the period 2012-2015. However, by 2016, almost no tonnage of sugar was exported through the border gate. In 2017, though some sub-border gates of China bordering Lao Cai, such as Muong Khuong, Ban Vuoc, Na Loc, Lung Po and Ban Quan, have reopened for sugar movement, only 2,500 tons of sugar were exported. The reason is due to the fierce competition between domestic sugar with temporarily imported sugar for re-export.

According to reporters, in 2015, under the proposal of the Ministry of Industry and Trade, the Government temporarily allowed imported sugar for re-export with 220,000 tons via Lao Cai province and time for re-export was extended to 31st December 2017. However, according to the report of Lao Cai People's Committee and the enterprises, the rate of implementation of license for temporarily imported sugar for re-export by the end of 2017 only reached about 43.73%, of which some enterprises have imported sugar but have not exported to China yet. Recently, the Ministry of Industry and Trade and Lao Cai People's Committee has proposed the Prime Minister to extend the license until 31st December 2019.

Mr. Doanh analysed if the Government accepts the extension of the license until 2019, the domestic sugar industry will be “dead” for sure. Currently, about 40,000 tons of temporarily imported sugar in the country have not yet been exported. The reason given by the enterprises is that sugar prices in the third country is too low. However, this reason is quite unreasonable. "As we know, the price of sugar in the third country is now around VND 20,000 / kg, so the temporarily imported sugar has not been re-exported for a cheap price by importing countries, which is not true. Furthermore, in the past, the temporary import for re-export of business in domestic sugar with a high price of around VND 16,000 – 17,000/kg did not bring as much profit as temporarily imported sugar with price of VND 13,000 – 14,000/kg, then re-exported with price of VND 20,000 – 21,000/kg. However, the price of domestic sugar has dropped to VND 13,000-14,000/kg, the enterprises are still not interested in the temporarily imported sugar for export not bringing benefits to the country, so this is just a story of group benefits," Mr. Doanh said.

Cutting price for competition

Before the difficult situation of the whole industry, recently the Vietnam Sugarcane and Sugar Association has submitted a proposal to the Prime Minister not to extent the expired licence of temporary import for re-export. The sugar export in sub-border gates in Lao Cai province should give priority to the domestic sugar enterprises.

Moreover, temporarily imported sugar which has not been re-exported yet is recommended to strictly follow Clause 4, Article 11, Chapter 3 of Decree 187/2013 / ND-CP detailing the implementation of the Trade Law on trade of international goods trading and operation agents involved in trade, processing and transit of goods with foreign countries. That means that this amount of sugar is forced to re-exported to the originating countries.

The Association also recommended the Government to direct the establishment of an inter-sectoral working team, including Ministry of Industry and Trade in coordination with Ministry of Agriculture and Rural Development, Ministry of Finance, General Department of Vietnam Customs and Vietnam Sugarcane and Sugar Association to inspect and evaluate the implementation for temporarily imported sugar for re-export, licensed until 31st December 2017.

Regarding the implementation of the ATIGA commitments, during the past, considering the proposal of the Vietnam Sugarcane and Sugar Association, the Ministry of Industry and Trade and the Ministry of Agriculture and Rural Development (MARD) have also submitted a proposal to the Government to delay the implementation of ATIGA for sugar product to 2020. Besides, some enterprises have proposed that MARD should soon propose the Government to develop the Law on Sugarcane to ensure a legal framework for the development of the industry and to promptly approve the restructuring project of the sugar industry.

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When the domestic sugar industry encounters difficulties, even to maximum difficult status as it is currently, the implementation of measures to support and remove difficulties is necessary. However, from another point of view, agricultural expert Vo Tong Xuan noted that the key measure is how to make the sugar industry competitive, rather than continuing protection. "Re-negotiating with ATIGA partners not only discredits Vietnam in relation to its commitments, but also increases the dependence of domestic enterprises. In order for increasing competitiveness, the solution is cutting the price of raw materials, thereby reducing the selling price of sugar. To do this end, it is necessary to carry out the restructuring of land lots to create large-scale fields of hundreds of hectares, then to implement mechanization. This will reduce costs by 50% compared to the current time, " Mr. Vo Tong Xuan analysed.