Vietnam opens up rice market, plunging exporters into difficulty

Local enterprises will face challenges in rice export this year 2011, even though Vietnam will have many opportunities, as the country has opened up its rice markets to foreign-owned traders under its commitments to the WTO, said Truong Thanh Phong, chairman of the Vietnam Food Association (VFA) on January 4.

Loading rice for export in the Mekong Delta

At a meeting in My Tho City, economists said the global demand for rice would soar in 2011, with Indonesia planning to import 1.5 million tons of rice. 
Vietnam signed a contract early this year to export 250,000 tons to Bangladesh in January and February. Last year, Vietnamese companies exported a total 400,000 tons to Bangladesh.
The Philippines, Vietnam’s traditional rice importer, has planned to import 1.5 to 2 million tons of rice this year, of which Vietnam expects to export one ton.
Malaysia will import 800,000 tons this year, of which VFA hopes to export 400,000-500,000 tons.
Chairman Phong said that despite the increasing global demand for rice, Vietnam’s exporters will face many difficulties because they have to compete with foreign-owned companies.
He said under the commitments, foreign-owned traders can trade and export rice directly from Vietnam, instead of buying rice from Vietnamese exporters.
In addition, loan interest rates offered to Vietnamese companies are 16.5 percent per year, while those offered to foreign companies are only 4.5 percent per year, he added.
According to VFA, the country earned US$3.2 billion from exporting 6.8 million tons of rice in 2011.
As many as 264 enterprises exported rice in 2010, but only 30 of them exported rice regularly and in large volume, the remaining exported only a few containers of rice.
Besides the commitments, a new Government decree issued last November will affect small exporters, because the decree forces rice exporters to have their own storage and milling facilities. 
Meanwhile, proponents said that this rule will give a boost to rice exports.
The decree, which comes into force in mid-2011, specifies that enterprises must have a rice-trading certificate, warehouse facilities to store at least 5,000 tons of rice, and milling facilities with a minimum hourly processing capacity of 10 tons.
Moreover, exporters must always store an amount of rice equivalent to 10 percent of the volume exported in the six preceding months.
Any business failing to meet these requirements, nine months after the decree takes effect on June 1, will be banned from exporting the food staple.
A Ho Chi Minh City rice exporter said the requirements will plunge many enterprises into deep trouble as many exporters do not have large storage facilities and others as required by the decree.

Sources: SGGP, SGT – Translated by Hoang Yen

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