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NEW UPDATES Asean Affairs  10 March  2015  

Sugar industry needs drastic reforms

Vietnam: Radical reforms including mergers and introduction of new technologies are needed to help the domestic sugar industry sustain its growth as the country deepens its international integration.

Experts and officials have pointed out that Viet Nam is poised to reduce import tariffs sharply under WTO and ASEAN commitments.

Viet Nam must grant an import quota of 81,000 tonnes of sugar to WTO member countries this year at preferential tariffs of 25 per cent and 40 per cent for raw sugar and white sugar products, respectively. This is a steep fall from normal tariffs of 80 per cent and 85 per cent.

The import quota has been raised by five per cent each year from 50,000 tonnes in 2007, when the country joined the WTO.

Also, recently, under ASEAN commitments, Viet Nam has offered preferential tariffs of 5 per cent to member nations for white and raw sugar.

Upcoming free trade agreements are likely to make it even tougher for local businesses, the experts say.

At present, the local sugar industry is hampered by poor cultivation techniques; a lack of high-yielding sugarcane varieties; and an absence of renovation, Deputy Minister of Industry and Trade Nguyen Cam Tu said last week.

He was responding to the media regarding the recent import of sugar produced by the Hoang Anh Gia Lai group's factory in Laos's Attapeu Province from the 2013-14 crop.

Besides, factories were not keen to support farmers when the price of sugar fluctuated in the country. Therefore, farmers were willing to cut down sugar canes to grow another plants to make profit.

They way the local sugar industry goes about its business is also problematic. Sugar mills do not maintain high quality, rely on middlemen to sell their products, and are yet to improve production efficiency to become more competitive, Tu said.

Low demand, large stockpiles and illegal imports are other obstacles facing the industry.To overcome these problems and have the domestic industry hold its own against regional and international competitors, weaker firms should merge with bigger ones, as has happened in the banking sector, he said.

International integration is a "correct policy of the Party and State" that poses both challenges and opportunities, and the only way to deal effectively with these is for all stakeholders to boost reforms, he added.

The Association of Sugarcane and Sugar Association (ASSA) has also mapped out several measures that focus in particular on sugarcane cultivation, seeking to redress a value imbalance between sugarcane farmers and sugar mills.

ASSA said last week that the plan for sugarcane cultivation, including land allocation, had to revised. The cultivation area should be large enough to meet the raw material demand of sugar mills that have a minimum output of 4,000-5,000 tonnes of sugarcane. Large sugarcane fields are also needed to apply new cultivation techniques.

Merging and removing small-scale factories for reinvestment and strengthening policy support for farmers, improving transport infrastructure and building better irrigation facilities are other urgent measures needed to improve the current situation, ASSA said.

It called for preferential policies on sugarcane varieties and better prices for power generated from sugarcane dregs as Thailand has done.

Another aspect where Thailand has to be emulated is to ensure equality among all parties in the sugar processing chain, particularly farmers, the association said.

There are more than 310,000 hectares under sugarcane cultivation in the country at present. In the 2013-2014 crop, sugarcane production reached 1.6 million tones, with productivity rising to a record 5.47 tonnes a hectare.

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