VIETNAM: Trade row erupts between sugar users and producers
Published: 07/13/2012, 11:10:12 AM
While food manufacturers have complained about the sugar import quotas, which prevent them from importing the good cheaply, sugar makers say the local supply is abundant, according to Vietnam's Tuoi Tre News.
Many local food manufacturers accuse the sugar makers are trying to sell at small amounts so that they can hoard the commodity to sell it at higher prices later.
Imported sugar is some VND4,000-5,000 a kilogram cheaper than locally produced sugar, so if the Ministry of Industry and Trade licenses an import quota of 70,000 tonnes for this year, they can save up to VND280-300 billion (US$13.43 million-US$14.34 million).
Meanwhile, the Vietnam Sugar Association (VSSA) has said since there no shortage of local sugar, there is no need to import more of the good.
VSSA said the request for sugar import quota licensing from food processing businesses is primarily for cheap sugar.
Truong Phu Chien, General Director of Bien Hoa Confectionery Corp (Bibica), said every year the sugar import quota is allocated by the ministry within the first quarter.
With the quota, local businesses will begin imports because the need of sugar for local use often increases sharply due to seasonal factors, mostly before the Mid-Fall festivals and the Lunar New Year.
However, up to now, the third quarter of 2012, the import quotas have not been assigned to the enterprises, while the latest sugarcane crop was harvested two months ago, and finished products of sugar are now in stock at local firms.
"When companies cannot import under the quotas, we have to buy local products, and it turns out to be a golden opportunity for local sugar firms to hike prices due to rising demand," Chien said.
Calculating for the price over the same period last year, businesses are paying VND5,000 a kilogram more for locally refined sugar, approximately the same rate paid by retail customers.
Currently, the price of refined sugar RE and RS that Bibica is buying stands at VND19,000 a kilogram and VND17,500 a kilogram, respectively, compared with the price of VND13,000-14,000 a kilogram with added tax of imported products.
"We still have to buy domestic sugar as the granted quota is insufficient. The problem is that the purchase of sugar faces many difficulties since local sugar companies refuse to sell in large quantities," he confirmed.
Similarly, Vietnam Dairy Products Company (Vinamilk) said its demand for sugar production in 2012 is 113,201 tonnes, of which the firm sought for an import quota of 75,000 tonnes from the end of 2011.
"But to this day it remains unresolved, although we have continued to send written reports to the ministry," said Bui Thi Huong, director of external affairs of Vinamilk.
According to Huong, from early 2012 until now, Vinamilk had to buy 57,014 tonnes of domestic sugar at prices which are 35 percent higher than foreign sugar.
"But it is very difficult to buy since local producers show that they don't want to sell the large amount we want, not to mention the quality often does not meet the standards in the production of our milk," Huong said.
According to Huong, right when the VSSA said local supply was in a state of surplus, Vinamilk had to buy at the price of VND17,000-17,200 a kilogram, while at present the price of imported sugar remains around VND14,000 a kilogram with all added taxes.
"After we sent bid requests to nine domestic suppliers, only two enterprises replied, while the remaining said they have no sugar to sell," Huong said.
According to VSSA, the 2011-2012 sugarcane crop ended with a total sugar supply of 1.375 million tonnes, almost reaching the 1.4 million tonne target to meet with the forecasted demand of the same amount set early this year.
In addition, a large amount of sugar smuggled from Thailand, currently estimated to be at 300,000 to 400,000 tonnes, has helped domestic supply remain plentiful, a small amount of which was even exported to China in the early months of 2012.
"Not to mention this year's sugar mills in the Mekong Delta will enter their new crop in August," said Nguyen Thanh Long, VSSA president.
As the region provides 30 percent of the local supply, there will be no shortage until the year-end," he added.
Nguyen Thanh Long, president of VSSA, said the import quotas are delicious cakes that local food manufacturers want to share.
"That explains why they just inked deals with local sugar suppliers to buy until July this year, as then they can complain about quality and prices to put pressure on the trade ministry for the import quota licensing."
Do Thanh Liem, chief executive of Khanh Hoa Sugar Company, said the import quota policy of the Ministry of Industry and Trade is unfair.
He states that there are thousands of businesses that use sugar in processing, but in reality only a dozen enterprises, often large ones, are granted the quotas.
With imported inputs lower in many countries, these enterprises have a competitive advantage compared to other businesses who are not granted the quota, leading to unfair competition.
According to Liem, Vietnam should run the import and export policies as flexibly as many countries in the region have already done.
The ministry can set up a sole importer who then offers biddings for domestic enterprises at the market price.
The amount of import-export gap will be reinvested to the sugar industry to improve competitiveness and reduce costs.