15:32 (GMT +7) - Tuesday 25/10/2016


At some risk

Released at: 14:58, 15/10/2015

At some risk

Mr. Doan Xuan Truc, Vice President and General Secretary of the Animal Husbandry Association of Vietnam, tells VET's Hoang Thu about how Vietnam's livestock sector will be affected by integration.

by Hoang Thu

What are your thoughts on the impacts of international integration, especially trade agreements, the TPP, and the ASEAN Economic Community (AEC) on Vietnam’s livestock sector?

Integration brings both opportunities and challenges to Vietnam’s livestock sector.  

When joining the TPP and the AEC and signing bilateral and multilateral trade agreements, Vietnam’s livestock sector will find it easier to access new products and breeds, advanced technologies, and production models. International integration will become a major motivation for the government and local authorities to accelerate institutional and administrative reforms, which will benefit the entire economy, including the livestock sector.

Restructuring of the livestock sector has been implemented at a slow pace for many years. Integration will force the sector to accelerate the process to survive and force local authorities to change their administrative thinking to achieve the highest level of management efficiency possible. International integration also creates greater opportunities for the livestock sector to attract more foreign direct investment (FDI) from foreign high-tech enterprises and large-scale companies.

Vietnam’s livestock sector is, however, considered vulnerable to trade pacts due to its deficiencies. The tens of millions of households that are part of the livestock sector are of small scale with fragmented production that lacks clear direction. 

Product prices remain high due to low labor productivity and animal productivity, a major dependence on imported animal feed and breeds, and high interest rates on bank loans. For example, the production price of pork is $2.08 per kilo in Vietnam and around $1.41 per kilo in the US, while the production price of beef is $2.53 per kilo in Vietnam and $1.70 per kilo in Australia.

Food safety and hygiene in Vietnam still exhibits many shortcomings. There are 28,000 small and medium-sized slaughterhouses in Vietnam and many have poor hygiene standards.

Veterinary quarantine is also quite poor, resulting in the easy spread of epidemics and posing a barrier for trade promotions and access to markets. Many households, farms, and enterprises in the sector know little about the trade agreements Vietnam has signed so are not prepared for integration.

Which sub-sector in Vietnam’s livestock sector will be most affected by international integration? 

Beef cattle will be greatly affected by trade agreements, especially the TPP. Vietnam has a modest area of grassland so it is difficult for households to raise beef cattle in large numbers. The HAGL Group can develop large-scale beef cattle farms as they own a large amount of agricultural residue such as sugarcane for use as cattle feed. Imported beef accounted for 30 per cent of total domestic consumption last year. Vietnam is forecast to import more beef in the future, mainly from New Zealand and Australia, as beef consumption by Vietnamese consumers is growing and imported beef is offered at a lower price and with better food safety and hygiene.  

Trade agreements also have a significant impact on the local processed chicken industry. Frozen imported processed chicken currently accounts for 20-30 per cent of domestic processed chicken consumption. Although Vietnamese people prefer fresh food, this will gradually change as frozen imported chicken has better food safety and hygiene and sells at half the price of domestic fresh products. Frozen processed chicken from the US, Brazil, Argentina, Australia, and South Korea will see exports to Vietnam grow when the TPP is concluded. 

Vietnam is also forecast to import more dairy products from New Zealand, whose production costs are half those in Vietnam. Domestic fresh milk production only meets about 30 per cent of demand as the development of dairy farming depends a great deal on ecological conditions and the ability to supply green feed, which are disadvantages for Vietnam. 
However, imports from other countries will change in line with tariff removals in trade agreements, especially the TPP. 

There are some concerns over the dominance of foreign enterprises in Vietnam’s animal feed market. What are your thoughts on this? 

Foreign enterprises provide more than 60 per cent of the animal feed in Vietnam’s livestock sector. Some foreign enterprises account for a major share, including Thailand’s CP (19.4 per cent) and the US’s Cargill (8.1 per cent). With advantages including strong financial resources and good management, among others, their production costs are more competitive than domestic enterprises. 

To prevent the dominance of certain players in the market the government should require enterprises, including foreign enterprises operating in Vietnam, to regularly publish their profits. The government should also issue policies on a base price for animal feed products and encourage direct links between animal feed plants and farms. This will guarantee stability in the animal feed market and ensure the rights of households and farms. Large-scale farms or enterprises in the livestock sector should study how to produce homemade animal feed to achieve the highest efficiency in their business performance. 

What should policymakers do to attract more large-scale Vietnamese enterprises to participate in the livestock sector? 

Decree No. 210/2010/ND-CP, dated December 19, 2013, which includes measures on encouraging enterprises to take part in the agricultural sector, needs to be brought into reality. 
It should have more incentives and support for enterprises in the sector, including in infrastructure (land leases), taxes and fees, human resources training, trade promotion, and loans with preferential interest rates. Vietnam’s livestock sector will only change when more large-scale Vietnamese enterprises join the sector and introduce high-technology.

What do you recommend the government do to protect the local livestock sector from the vulnerabilities arising from trade agreements and international integration?

The government should research and issue specific policies and action plans to protect the livestock sector. It should also issue policies to encourage the establishment of links within the sector. Links would help reduce intermediary costs and stabilize input and output markets. It should have action plans in place to encourage the establishment of high-tech and large-scale farms and modern collectives (cooperatives) in the sector.

It should issue loans with preferential interest rates equal to half of the official interest rate for those in the livestock sector and provide training courses with practical experience to farm managers and animal husbandry workers. Trade promotion should be strengthened in order expand consumption markets for key livestock products such as salted duck eggs and pork, among others.

Restructuring of Vietnam’s livestock sector needs to be aggressively implemented, with cooperation among relevant ministries and agencies, so that it can survive in the face of pressure from international integration.

  • TAGS
  • Mr. Doan Xuan Truc
  • livestock sector
  • TPP
  • AEC

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