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                                                                                                                           Asean Affairs  July 18, 2013  

Pepper exports soar but stocks left bare

by Le Hung Vong

The country now has almost no pepper left for export for the second half of the year, according to the Ministry of Agriculture and Rural Development.

For the first six months of the year, Viet Nam, the world's top pepper producer, exported 85,000 tonnes worth US$552 million.

"I'm amazed at the figure of 85,000 tonnes of exported pepper," said a representative of an exporter in Binh Duong Province after surveying the latest crops in the provinces of Dong Nai, Ba Ria-Vung Tau, Binh Phuoc, Dak Nong, Dak Lak and Gia Lai.

The Viet Nam Pepper Association (VPA) predicts that this year's pepper yield will be 90,000-95,000 tonnes. About 60,000 ha are under cultivation.

The VPA said from 10,000 to 15,000 tonnes of pepper imported from other countries in the region would be used for re-export, thus bringing "the total availability" of pepper eligible for export to 105,000-110,000 tonnes this year.

Based on these estimates of yield and export volume, local farmers now have about 10,000 tonnes of pepper in stock.

Meanwhile, local pepper demand remains about 5,000 tonnes annually. With such demand, the amount needed for export cannot be met.

According to figures from the Ministry of Agriculture and Rural Development, pepper exports in the first five months of this year reached 68,000 tonnes, bringing home $446 million, a year-on-year increase of 14 per cent in volume and 9.6 per cent in turnover.

The average pepper export price stood at $6,554 a tonne in the first five months, shrinking more than 4 per cent year-on-year.

The agriculture ministry's figures show that export volume surged despite price falls in the last six months.

According to Nguyen Quang Binh, director of the HCM City-based Chanh Tinh Anh Co. Ltd., the price of black pepper in the local market did not fluctuate as sharply as the prices of other farm produce, such as coffee and rubber.

The January-May export rice price, for example, averaged $445 a tonne, tumbling 7.7 per cent year-on-year, bringing down local paddy prices to only around VND4,000 per kilo at times.

In addition, the five-month average export price for rubber was $2,595 a tonne, a decrease of more than 15 per cent over a year ago, with natural rubber prices hovering around VND40-42 million a tonne.

In the past few months, the price of black pepper ranged between VND110,000 and VND130,000 per kg. On July 10, black pepper sold for VND115,000 per kilo in Pleiku, VND118,000 per kilo in Binh Phuoc, and VND120,000 per kilo in Ba Ria – Vung Tau.

"The gap in prices of black pepper depends on the distance between the growing areas and the processing centres, which are normally based around ports, such as ports in HCM City," Binh told Viet Nam News.

The stability of pepper prices helped a small number of local farmers keep their goods in stock, waiting for higher prices, said Binh.

Most of the country's exports are semi-processed pepper. The VPA has encouraged its members to invest in processing technology, turning low-priced black pepper into high-priced white pepper.

However, Binh said that farmers had other priorities.

"To earn an additional $200 – $300 on one tonne of exported pepper by processing black pepper into white pepper is not the long-term target of Viet Nam's pepper sector. The industry is now aiming to bring Vietnamese pepper to dining tables at restaurants, hotels and dining rooms of families around the world," said Binh.

Drop in FDI

Viet Nam is attracting foreign direct investment (FDI) at a slightly lower rate than a number of countries in the region, but it is not being "left behind," according to the Minister of Planning and Investment (MPI).

Speaking to VTV last week, MPI Minister Bui Quang Vinh said Japanese investors now have 7,000 projects in Thailand and 1,500 projects in Viet Nam.

"It's easy to understand," Vinh said, adding that Thailand and Indonesia have more FDI projects than Viet Nam because their economies are more developed than Viet Nam and have been open to global trade for a longer period.

"These ASEAN countries also have better investment environment and more modern administration," he said.

"In addition, these two countries, compared to Viet Nam, have better-developed support industries and better-skilled labour forces," said Vinh.

However, Viet Nam had been speeding up its administrative reform, making its investment environment more transparent, and encouraging development of support industries through preferential investment policies, he noted.

The volume of FDI into Viet Nam has been stagnant due to the global economic crisis, but it has been regaining some strength recently.

Viet Nam's FDI reached its peak in the 2005 – 2009 period when attracting investment capital was the number-one priority of the Vietnamese Government.

During this period, the Government issued major investment incentives while restrictions on project assessment and management were loosened.

With the advantage of cheap labour costs at that time, Viet Nam was able to attract many labour-intensive projects. However, they consumed large volumes of minerals and caused environmental problems.

Vinh said the current investment environment was quite different from that period.

As the country's macro-economy developed to a certain level, the Government began to license hi-tech projects that are environmentally safe, and launched high value-added projects instead of investment projects.

Vinh said that the country's investment environment could no longer maintain its competitiveness on cheap labour costs as labourers' salaries risen along with economic growth.

"Registered capital has not been as high as the peak investment period, but disbursements are much bigger. These are more economically effective, and they create more jobs with higher salaries," said Vinh.

To better manage FDI projects, MPI has learned from Indonesia's experiences in licensing investment projects.

When a foreign investor is granted an investment certificate after entering Viet Nam, management agencies will closely check disbursements and the progress of investment projects after their registration, Vinh said.

The investment licence will be granted to an investor only when requirements on facilities, technological and environment infrastructure are completed as the investor has pledged under its commitments.

"These formalities will help to reject fraudulent projects that were done for other purposes, such as to misappropriate plots of land," said Vinh

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AseanAffairs   04 January 2011
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