Struggling with ATIGA, sugar industry ready for petition

The implementation of commitments in the ASEAN Trade in Goods Agreement (ATIGA) from January 1, 2020 has caused a massive influx of imported sugar, pushing Vietnam's sugar industry into difficulties.

Improving production efficiency and competitiveness is an important solution to help sugar companies overcome difficulties. Photo: Nguyen Thanh

Sugar imports increase nearly seven times

According to Nguyen Van Loc, Acting Secretary General of Vietnam Sugar and Sugarcane Association, since January, Vietnam has implemented ATIGA commitments; sugar has been imported freely from ASEAN countries. Many large industrial customers in the sugar industry have imported directly and reduced or not bought sugar produced from sugarcane. With the price of sugar pushed down to the price of imported sugar and sometimes lower, sugar produced from sugarcane has to be in storage or sold below production cost.

Vietnam is one of the major sugar producing and consuming countries in the world and in ASEAN. Vietnam’s production capacity is 1-1.3 million tonnes of sugar per year on average, while demand for direct consumption and production and processing is about 2 million tonnes per year.

In terms of productivity, compared to other countries in Asia and ASEAN, Vietnam’s average annual productivity of sugar ranks sixth after the following countries: China (10 million tonnes), Thailand (8- 9 million tonnes), Australia (4 million tonnes), Indonesia (2 million tonnes) and the Philippines (2 million tonnes).

Regarding consumption, China (consuming 14 million tonmes per year) and Indonesia (7.5 million tonnes per year) always rank first in domestic sugar consumption. Domestically produced sugar is not sufficient and has to be imported. Thailand and Australia are the two largest sugar exporter in the region; Thailand exports about 5 million tonnes of sugar per year on average. Vietnam, Indonesia and the Philippines are major sugar importers from Thailand.

Phan Van Chinh, Director of the Import and Export Department (Ministry of Industry and Trade) shared thatsince the elimination of tariff quotas under ASEAN, the total amount of imported sugarcane into Vietnam has increased rapidly. Specifically, in the first seven months of 2020, the import volume hitnearly 820,000 tonnes, an increase of nearly seven times compared to the same period in 2019. Ofwhich, the volume of cane-sugar imported from Thailand to Vietnam accounted for the main proportion, nearly 92% of total imported sugar into Vietnam. The volume of imported sugar from Thailand reached nearly 750,000 tonnes in the first seven months of 2020 (while in the first seven months of 2019 it was only 104,000 tonnes, for the whole year of 2019, 300,000 tonnes).

Le Van Tam, Chairman of Lam Son Sugar Joint Stock Company, said the implementation of the ATIGA had many impacts and caused difficulties for the domestic sugar industry. Low sugar prices have reduced sugarcane prices, seriously affecting raw material areas. The income of sugarcane growers has decreased, sugarcane farming areas have been narrowed; the productivity and quality of sugarcane have not been improved, sugar mills have not had enough raw materials for production.

Similarly, Pham Hong Duong, Standing Vice Chairman of Thanh Thanh Cong - Bien Hoa Joint Stock Company (TTC Sugar) said that before joining the ATIGA, Vietnam had 41 sugar mills in the north; about 300,000 hectares of sugarcane and 300,000 farmers. However, at present, only 30 mills are in operation and 11 mills closed. Of those 30 mills, only 13 are still operating for capital rotation, the rest are suffering losses. Regarding farmers, there are currently only under 170,000.

"In the years 2015-2016, the country could produce 1.5 - 1.6 million tonnes of sugar, but currently the productivity is 700,000 tonnes. While, it is expected to end 2020, Vietnam will import 1.2 million tonnes. That is unreasonable for farmers, mills and companies,” said Duong

Ready for petition against anti-dumping

Regarding the reason why the sugar industry has fallen into such difficulties as at present, Locadmitted that Vietnam has not had effective tools to protect the domestic sugar market like neighbouring countries. In many different ways, neighbouring countries only allow imported sugar to enter the market after domestically produced sugar has been consumed. Currently, many countries are applying interventions.

Thailand is cited as an example, Loc emphasised: "As of June 30, the Thai government agreed to finance the Thai sugar industry with 10 billion Baht, equivalent to US$317 million. Meanwhile, the Vietnamese government’s fund to the sugar industry has been zero so far. Under such circumstances, Vietnam's sugar industry is working very hard in the integration period. Sugar companies have taken efforts but have looked forward to Vietnam’s trade remedies effective as soon as possible".

Phan Van Chinh analysed that existing trade remedies are usually in three forms: self-defence (applicable at the same time with many countries, even globally); anti-dumping and anti-subsidy (only applicable to investigated countries).

Based on the proposal of the domestic manufacturing industry and conditions, countries often choose one of the two options, either an anti-dumping investigation (can be combined with the anti-subsidy investigation), or an anti-subsidy investigation. The domestic sugar industry has submitted a request for an investigation for anti-dumping measure to imported high fructose corn syrup (HFCS) to Vietnam. For this request, the Ministry of Industry and Trade has considered, appraised and issued a decision to conduct an investigation. The investigating agency is asking related parties to provide information for the investigation process. In addition, for sugarcane products, the domestic industry has submitted a request for an investigation for anti-dumping and anti-subsidy for sugar roducts imported from Thailand. The Ministry of Industry and Trade is in the process of reviewing the content of the request to make a decision on the investigation.

Some agricultural experts believe that besides expecting trade remedies, Vietnam’s sugar industry also needs to pay special attention to improving internal resources and competitiveness. Tran Cong Thang, Director of the Institute of Policy and Strategy for Agriculture and Rural Development (MARD), said it is necessary to review the sugarcane farming areas and keep only the strategic and effective farming areas and to identify convertible and ineffective areas to introduce incentive policies and allow conversion.

"Motivated by suitable and advantageous areas, it is necessary to continue to promote the application of high technology, mechanisation in production, and encourage the application of 4.0 technology in raw material area management to reduce labour and increase harvesting rate, and reduce losses, thereby reducing the sugarcane farming costs, building concentrated sugarcane farming areas and promoting the application of mechanisation," Thang emphasised.