Loosening the ATIGA implement: Sugarcane industry has a way out?

The sugarcane industry is experiencing an extremely difficult period. In addition to loosening the tariff quotas for sugar commodities under the ASEAN Trade in Goods Agreement (ATIGA) by 2020, the active restructuring of the business as well as the determination to prevent sugar smuggling is the key solution for the sugarcane industry to overcome these difficulties.

Illustration. Internet

The Price hit the bottom

According to the report of the Department of Agro-product Processing and Market Development (MARD): in the 2017 – 2018 season, sugarcane factories have bought and pressed over 15.4 million tons of sugarcane, up 16.8% compared with the previous season. The total sugar consumption in this crop was over 1.4 million tons, up 385,663 tons. As of August 15, the volume of sugar remaining in the factories was 622,040 tons, 67,584 tons higher than the same period last year.

Remarkably, the price of sugar in the 2017 – 2018 season has complicated changes. It is currently at the lowest level in recent years, which can be said to have reached the bottom. Specifically, the price of sugar continuously decreased from the beginning of the season (at the beginning, the price of white sugar type I including VAT at the factory's warehouse was ranging from 13,500 - 14,500 VND/kg, at the middle, the price was 12,000-12,500 VND/kg and at the end was 10,500 - 11,500 VND/kg). In comparison with the previous crop, the sugar price decreased by 3,000-5,000 VND/kg on average. This was a huge reduction, leading to many difficulties for businesses. Regarding sugar factories, the Department of Agro-product Processing and Market Development stated that: there are 37/41 sugar factories operating in the whole country in the 2017-2018 season. Four factories including Hiep Hoa, Kien Giang, Ca Mau and NIVL have suspended operation due to their losses and long lasting debts.

The representative of the Department of Crop Production (MARD) said that the sugar price falling to the bottom was due to the objective reasons of the increased sugar supply in the world compared to demand, the sugar price in the world dropped sharply (the white sugar price in October 2017 intersecting with the period of November 2017 was 394.8 USD/ton, while the price of white sugar in August 2018 intersecting with the period of October 2018 was only 306 USD/ton). In addition, the sugar smuggling management has not really been effective yet. Smuggled sugar at cheap price was difficult to control while the domestic sugar price was not competitive.

Regarding this issue, Mr. Le Xuan Trung, General Secretary of Vietnam Sugar Association evaluated, "In 2018, the world sugar price was too low, affecting the domestic sugar price. Moreover, the prevention of sugar smuggling has not met the requirements, causing great impact. The domestic sugar price was nearly equal to the price of smuggled sugar.”

Regarding the shortcomings of the sugarcane industry, the Department of Crop Production added: At present, the active restructuring of sugar mills is slow. Small-scale sugar mills should have a reasonable plan to increase their productivity, quality and decrease price of new products so that they can withstand integration pressures. In addition, the state policies in encouraging investment to improve the efficiency of sugarcane and sugar production, using waste and by-products, are not really effective due to limited resources ...

The effort of the business is the key point

In fact, facing the difficulties of the sugar industry, the Prime Minister recently agreed with the proposal of the Ministry of Industry and Trade on the deadline for implementing the ATIGA. Accordingly, the Government agreed to continuously apply the tariff quotas for sugar until the end of 2019. The implementation of the commitments under the ATIGA will commence from 2020. Earlier, according to the commitment under the ATIGA, the tariffs on sugar imported from ASEAN countries have decreased from 5% to 0% since 1st January 2018.

Mr. Le Xuan Trung commented: The delay in applying the ATIGA in 2018 and 2019 was a way to support the sugar industry in the transition period during the integration process. By the end of 2019, whether the sugarcane industry has overcome difficulties or not, the efforts of enterprises is the most important. At present, there are companies overcoming the difficulties, but it is difficult for others, especially for farmers to do this. "For foreign countries, when the tariff quotas are cut, they still regulate their domestic sugar price, while Vietnam is completely dependent on world sugar price and smuggled sugar. The world sugar price and smuggled sugar price are down, so is the domestic sugar price. We need to do better to control sugar smuggling," Mr. Trung said.

Of the same view, Mr. Pham Quang Vinh, Chairman of Can Tho Sugarcane Joint Stock Company, stressed that the biggest obstacle faced by the sugarcane industry in Vietnam is smuggled sugar. Sugar mills need the government to support a number of policies that are in line with other sugar producing countries in the region. Specifically, the Government should soon apply a special tax on liquid sugar (HFCS); consider adjusting the price of electricity using cane bagasse as raw material as equal as the biomass electricity price under the Prime Minister's Decision No. 24/2017/QD-TTg. "In addition, the relevant ministries should promote cooperation with anti-smuggling, trade fraud and counterfeit agencies to effectively implement measures against sugar smuggling," Mr. Vinh said.

Apart from the above issues, for the coming period the Department of Crop Production identify: improving the processing capacity as well as organizing domestic consumption and export system better are basic solutions to promote the sugar industry, enhance its competitiveness. Specifically, the solutions are: to restructure processed products according to the international standards (raw sugar and refined sugar); to encourage the linkage between sugar mills to form a system of supplying raw sugar and refined sugar processing mills in order to improve their efficiency; to support the investment enterprises to diversify sugarcane products... For the system of domestic consumption and export: to gradually determine the storage of sugar cane material for producers in the direction of professionalism and objectivity; to facilitate connecting and sharing of benefits between production and circulation, distribution and consumption in order to reduce intermediary costs and production costs; to build data systems, update on the world sugar market information to actively participate in transactions when meeting requirements.