Sugar Industry Faces many Difficulties

On July 1, 2006, the Vietnam Sugar Association held a national conference in Quang Ngai province to discuss measures to promote consumption, stabilise the local market and prepare conditions for the 2006-2007 crop.

 

The 2005-2006 crop ended with results lower than expected as the output continued to drop by 10 per cent and the stock volume increased by 30 per cent. The volume of sugar illegally imported via border gates in the south and Central Vietnam continued to increase. Many sugar plants are in difficulties and hard to exist. The farming and collection of sugarcanes remain unorganised.

In the 2005 crop, sugar plants in some localities collected materials at a price of VND 730,000 per tonne, a price which farmers could not dare to think of even in their dreams. Consequently, farmers, especially those in the Mekong delta shifted to sugarcane farming, abandoning other crops. Is sugarcane a sustainable crop? No one can yet answer the question. Buyers continue to price highly and farmers continue to grow sugarcanes while the future of the crop is unclear.

 

Le Van Tam, chairman of the Vietnam Sugar Association, told the conference that the price of ordinary sugar product was just around VND 7,000 per kilogram while price in the Vietnamese market was put at VND 11,000 per kilogram, or sometimes higher. This is abnormal and how long will the abnormal price exist? If plants continue to buy sugarcane at price of over VND 700,000 per tonne, what is the future of the Vietnamese sugar industry? Therefore, bankruptcy is no longer a prediction, said Tam.

 

In fact, in major sugar plants don’t care about price of sugarcane for the benefit of farmers. Instead, they care only about price of sugar. Many sugar plants which were established recently, have collected sugarcane at sky-high prices whenever sugar prices increase. The buying of sugarcane and selling of sugar doesn’t involve sugarcane farmers and consumers. This is a playground for sugar manufacturers and traders only. 

 

From the early 2005-2006, according to plans of the Ministry of Agriculture and Rural Development and the Vietnam Sugar Association, Vietnam is expected to lack around 300,000 tonnes, so the Ministry of Trade has allowed enterprises to import an amount equal to 300,000 tonnes. Of the figure, 30 per cent will be provided for sugar plants, 30 per cent for sugar-suing food processing, 30 per cent for trading enterprises, and ten per cent for reserves, which can be used when interference into the market is needed. So far, according to the General Department of Customs, Vietnam has imported around 200,000 tonnes.

Ironically, when Vietnam has to import sugar, by June 20, 2006, local sugar plants were reported to have had 223,000 tonnes in stock. The stock volume at trading companies is reported to reach over 100,000 tonnes.

 

The Vietnam Sugar Association explained that a lot of sugar was imported from Thailand via border gates in the south and the Lao Bao border gate in Central Vietnam. Since March 2006 alone, the volume of sugar smuggled cross border has reached over 300,000 tonnes. In Chau Doc, An Giang province, alone, 1,500 tonnes of sugar were imported per day.

 

At the conference, representatives from many sugar plants and enterprises expressed their concern that they would face difficulties due to widespread of illegal import of sugar via border gates at low prices. The Vietnam Sugar Association should propose the Government to take necessary measures to control and prevent the illegal import of sugar cross border. At the same time, it should propose that the Government, the Ministry of Agriculture and Rural Development and the Ministry of Trade consider and adjust their licences to enterprises to import sugar.

 

The Chairman of the Vietnam Sugar Association, Mr. Tam, warned that local enterprises should develop suitable plans to sell their sugar at reasonable prices instead of clearing out their stock products. This is because if the demand of the market does not increase, enterprises will find it hard to sell their products despite a strong cut in prices.

 

In late 2003, Vietnam had 43 sugar plants, with a total capacity of 82,850 tonnes of sugarcane per day. Of the figure, there were six joint venture companies and 100 per cent foreign-owned enterprises, four equitised enterprises and 33 State-owned enterprises.

 

So far, six plants, including Viet Tri, Quang Binh, Quang Nam, Binh Thuan, Binh Duong and Tri An, have closed. Eleven plants have been equitised nine other are completing procedures for equitisation. An enterprise is facing financial obstacles before equitisation. This is the Tra Vinh Sugar Company. Five enterprises, including Son La, Kon Tum, Cam Ranh, Kien Giang, and Thoi Binh, have failed to meet conditions to be equitised.

 

Most plants which failed to meet conditions to be equitised face financial problems, suffering losses for years. The solution for the plants is to be sold. However, concrete settlement measures still have to wait for guidelines from the Government. Therefore, according to participants of the conference, the Vietnamese sugar industry will not be strong enough even in the home market when Vietnam joins the World Trade Organisation (WTO) until the local system of sugar plants is re-organised and renewed reasonably.

 

Vietnam is getting closer to its accession to WTO, what should the remaining 37 sugar plants nationwide in the 2005-2006 crop think about their existence and the existence of 265,000 hectares of sugarcanes nationwide with millions of farmers.

It is expected that Vietnam will have a total area of 303,000 hectares under sugarcane in the 2006-2007 crop, or 38,000 hectares more than the 2005-2006 crop. Under favourable climatic conditions, yield is expected to reach 52 tonnes per hectares, which means that Vietnam will have 15.7 million tonnes of sugarcane.

 

Under the plans of sugar plants, in the 2006-2007 crop, 1.1 million tonnes sugar will be produced with 11.7 million tonnes of sugarcanes. The operation capacity of plants reached 91 per cent.
B.T