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Saving the staple

Released at: 17:29, 05/02/2015

Saving the staple

Vietnam has devoted much effort to promoting rice export activities over recent years but more must be done in the face of fierce competition.

by Huyen Vy

Vietnam predicts it will export 6.7 million tons of rice this year, or 1 million tons less than in 2014. The situation could be even worse, with major competitor Thailand offering cheap prices in a bid to reduce stockpiles. Changes in demand for rice imports in traditional markets such as China may also result in further problems for Vietnam’s rice exports.

Potential threats

According to a report from the Vietnam Food Association (VFA), Thailand will lead the way in rice export market share in 2015 with 10.8 million tons, which is 5 per cent higher than in 2014, followed by India with 8.7 million tons. Vietnam is expected to be in third place with its 6.7 million tons. 

In terms of importing countries, China is forecast to import 4 million tons, an increase of 300,000 tons and being the largest rice importer in the world for the third straight year. China’s rice imports have increased significantly in recent times mainly due to lower world prices from slight increases in supply compared with demand and efforts to reduce stockpiles. In Southeast Asia, the Philippines’ rice imports are expected to be about 2 million tons, Malaysia’s 1.1 million tons, and Indonesia’s 1.5 million tons. Africa imports about 10 million tons, with Nigeria forecast to import 3.5 million tons, making it the second largest market after China. 

In terms of rice export markets in 2015, VFA forecasts China to remain the largest but exports will be impacted significantly by its policy of controlling and preventing smuggling. China will also consider imports from other sources at lower prices. Therefore, the amount of Vietnamese rice exported to China may well decline in 2015. In Southeast Asia demand will not change too much compared to 2014, with a total of about 4.5 million tons, with Thailand in particular presenting tough competition.

Africa is considered Vietnam’s second largest market but last year Vietnam lost around 60 per cent to Thailand and India. It is expected that in 2015 Thailand will continue to dominate the market based on selling government stockpiles at competitive prices. Vietnam has maintained its market share in jasmine rice and other specialties and this trend should continue in 2015.
From January 9 Mexico formally imposed a tax of 20 per cent on rice and 9 per cent on paddy imports. According to the VFA, in 2014 Vietnam’s rice exports to Mexico grew impressively. Although Mexico is not a major market, the tax hikes will still have an effect on overall exports, particularly in the context of fierce competition among exporters. The Mexican Rice Council reported that the reason for the tax increases is that the liberalization of trade in rice and paddy imports has cut local rice paddy market share by up to 88 per cent.

Government efforts

In face of these challenges, this year the Ministry of Industry and Trade (MoIT) will continue to implement measures to boost rice exports, focusing on fiercely competitive markets such as Africa, West Asia, and South Asia. 

Accordingly, Directive No. 08/CT-BCT from MoIT is being actively implemented to strengthen market information, promote the rice trade and implement the Memorandum of Understanding (MoU) between MoIT and the Ministry of Agriculture and Rural Development in boosting the production and export of agricultural, forestry and fishery products and continuing to research and compile a strategic rice project to develop the rice market to 2020. Negotiating and signing MoUs on rice trading is taking place  with the Ivory Coast, Congo, Kenya, Angola, Mozambique, Madagascar, and other African nations.

MoIT has also directed Vietnam Trade Offices (VTOs) overseas to closely supervise and regularly report on market information and the possibility of signing MoUs. They also need to introduce customers, support enterprises, identify partners, negotiate, sign contracts, and settle disputes. Trade promotions will be enhanced regionally to boost rice exports. The government especially aims to focus on supervising, analyzing and evaluating the activities of competitors such as Pakistan, Thailand and India.

Also, in collaboration with the Vietnam Chamber of Commerce and Industry (VCCI) and the International Organization of La Francophonie (OIF) and the International Trade Center (ITC), VTOs will hold meetings with banks and with rice buyers and sellers to establish relationships between commercial banks in Vietnam and Africa as well as between rice importers and exporters, to enable business activities and facilitate export payments. Monitoring and supporting businesses on both sides will be done in the implementation of MoUs signed on rice with Bangladesh, Sierra Leone, Guinea and Comoros. Additionally, VTOs are responsible for supporting businesses to establish companies, open rice-bonded warehouses in some key markets such as Cameroon, Angola, and Mozambique, for direct consumption, and supporting businesses to deploy the “Bartering Vietnamese Rice for African Cashew Nuts” scheme.

In order to facilitate the export of rice, the VFA has also requested the government direct banks to have special policies for supporting interest rates and increasing credit deadlines for rice exporters due to recently issued decisions and decrees on supporting stability in paddy and rice markets. The ability of businesses to borrow working capital at preferential interest rates is to be enhanced in order to ensure business operations and to support investment. The Ministry of Finance should consider tax exemptions for exporters when they also sell for domestic consumption, so that they may compete fairly with local companies who benefit from zero tax rates. 

For the implementation of MoIT’s project to build raw material areas and link farmers, rice traders and exporter in the 2015-2020 period, VFA has recommended that government policies encourage and support the cooperation of manufacturing enterprises and business relating to rice consumption instead of the compulsory provisions in the project. The time for starting the project should be put back to 2016 so enterprises have sufficient time to recover their capacity and build up a stable business environment. In addition, there should be a mechanism to control supply and the cost of raw materials, to support farmers, as long as the policy supports product consumption to ensure minimum incomes for farmers amid fierce competition in the world market.

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