Sugar industry suffers a lot of losses

	Sugar industry: some die, others thrive
	Sugar industry sees bitter side of ATIGA’s impacts
	Sugar industry has two more years to prepare for ATIGA

Director General of Vietnam Customs chaired the conference. Photo: N.H

Farmers suffer losses, mills closed

According to Vietnam Sugar Association, the country has 40 enterprises doing business in sugar production. In the 2017-2018 production season, the whole country had 37 of 41 sugar mills operating (four factories temporarily stopped operation), the production of sugar was 1,476,500 tonnes. In the 2018-2019 production season, sugar mills produced 1,173,933 tonnes of sugar.

According to the Vietnam Sugar Association, the sugar industry is facing many difficulties. The total area of ​​raw sugarcane material has now decreased by 30-60 percent compared to previous years. Sugar mills have to maintain low capacity due to the lack of raw sugarcane material. An investment cost per 1,000m2 of sugarcane is about VND 7 million, but farmers profit only about VND 3-4 million, causing debts for the farmers. There are heavy losses in some areas, so farmers have to abandon the fields because the more the investment is, the more losses, farmers suffer. There have been 17 of 30 sugar mills suffering losses and lost equity.

According to the Vietnam Sugar Association, sugar smuggled from Thailand has caused great damage to Vietnam's sugar industry in the long term. Over the past two years, large-scale trade fraud and smuggling have caused a third of Vietnam's sugar mills to be closed and many sugarcane fields abandoned due to losses.

Currently, Vietnam's sugar price is higher than Thailand’s because the domestic sugar industry is facing unequal competition due to trade fraud, subsidies, price support and disguised protection that have been conducted in a sophisticated and systematic manner on a large scale for decades.

Notably, according to the commitment of the ASEAN Trade in Goods Agreement (ATIGA), from January 1, 2020, sugar products from ASEAN countries to Vietnam will be eliminated import quotas with an import tax rate of only 5 percent.

With the sugar industry under pressure from increasing trade fraud, smuggling of sugar and uncontrollable, the accession to and implementation of the ATIGA agreement will create greater pressure for this industry.

Commenting on the difficulties of the sugar industry, Dang Viet Anh, Chairman of the Board of Directors of Tuy Hoa Sugar Factory, said many think the elimination of tariff quotas under the ATIGA Agreement will solve smuggling problems for the industry. However, smuggled sugar can only be reduced but cannot be eliminated. Because although eliminating the quota, there are still Import Tax, VAT, Corporate Income Tax, smuggling, excluding the risk that units will take advantage of import to circle dossier and invoice for trade fraud and profit.

According to Anh's analysis, currently, the consumption of sugar per capita in Thailand is 40kg, Indonesia is 35kg, in Vietnam in 2019 is about 20kg. Thus, the domestic demand of sugar is about 1.7 to 1.8 million tonnes. Meanwhile, production of domestic enterprises is about 1.2 million tonnes. The supply was higher than demand, while the low selling price and the high inventories of enterprises because there was a large amount of smuggled sugar on the market.

Currently, about 70 percent to 80 percent of the world's sugar volume is from four countries Australia, Brazil, India and Thailand, these countries are manipulating world sugar prices. Vietnam's sugar price is among the lowest in the world's 120 sugar producing countries, but higher than Thailand's. Despite international integration, no country has opened the sugar market except for the four countries participating in the ATIGA. However, the three countries participating in ATIGA with Vietnam have opened but there are still protective measures for their domestic sugar production and Vietnam’s sugar does not find it easy to penetrate these markets.

A representative of a sugar enterprise expresses an opinion at the conference. Photo: N.H

Many reasons

Regarding the impact of smuggled sugar on domestic sugar production, Le Van Quang, Deputy General Director of Lam Son Sugar Company said the sugar industry and enterprises have made great efforts in improve productivity, quality and make use of all by-products from sugar production, but there are still difficulties.

The cause is due to the increase in sugar. In 2015-2016, smuggled sugar increased, the sugar price sold at mills of enterprises was from 15,000 to 16,000 per kg. The price of sugarcane purchased from farmers was VND 1,115,000/tonne. In recent years, the sugar price has gradually decreased to VND 10,000/kg, leading to a decrease in sugarcane purchasing price.

Currently, the sugarcane purchasing price of sugar mills is only VND 800,000/tonne. Therefore, to remove difficulties for the sugar industry and farmers, a radical solution is that competent forces must strengthen the fight against smuggling and trade fraud so enterprises can compete fairly.

Besides, the cause of smuggled sugar, some comments at the conference also said the current difficulties of the sugar industry stem from many internal problems. According to a representative of the Ministry of Agriculture and Rural Development, the sugar industry has not developed as expectation due to the small production, high productions cost and without mechanisation application. The scale of mills is small, there are only 2-3 mills with large capacity, sub-sector production is still limited.

Besides, the price of imported raw sugar is lower than that produced from sugarcane, sugarcane production is discouraged; the import of sweeteners for food production is also creating unfair competition for sugar production because sweeteners do not have quotas and the tax rate is 0 percent.

Nguyen Anh Hoang, Director of Binh Phuoc Industry and Trade Department also said that besides, the cause from smuggled sugar, it needs to consider other causes of difficulties for the sugar industry. Currently, policies for the sugar industry are still shortcoming and slowly amended. The Ministry of Agriculture and Rural Development needs to chair meetings to provide solutions for the sugar industry in the future under the pressure of the ATIGA.

Director General of Vietnam Customs Nguyen Van Can said that compared to other countries, preferential policies for Vietnam's sugarcane production are very good including tax policy, material development. The sugar industry also needs to reconsider the connection between the planning of raw material areas and the sugar mills is whether rational, satisfactory and comprehensive or not?

To support the sugar industry, the General Department of Vietnam Customs will report to the leader of the Steering Committee to report to the Government to issue solutions to support the sugar industry such as technical barriers, auctions, policies for sugarcane farmers and sugar mills, and strengthening the fight against smuggling to create fair competition for domestic sugar products.