Thai sugar beats domestic supply

Since Vietnam implemented commitments in the ASEAN Trade in Goods Agreement (ATIGA) for the sugar industry, Thai sugar has poured into the country.  Accelerating investigations into the application of anti-dumping and anti-subsidy measures for sugar is considered the"light at the end of the tunnel" for Vietnam's sugar industry.

To develop in the new situation, the sugar industry needs to restructure, improve productivity, and effectively invest in reducing costs. Photo: N.Thanh

Imports surge

Vietnam started implementing ATIGA commitments on the sugar industry from January 1, 2020 by not limiting the amount of sugar imported from ASEAN countries and the tax rate of only 5%.

Mr. Nguyen Van Loc, Acting Secretary General of Vietnam Sugarcane Association, said that following ATIGA's commitments, a record volume of sugar immediately entered the Vietnamese market. Specifically, in the first 10 months of 2020, the amount of sugar imported into Vietnam increased dramatically, after subtracting the amount of sugar exported by type of production, the amount of imported sugar entering the domestic market reached more than 884,200 tons, is higher than the amount of sugar produced from domestic sugarcane. Of which, the amount of cane sugar imported directly from Thailand to Vietnam accounts for the main proportion (87.67%).

Besides, the amount of sugar imported from Malaysia, Cambodia, Indonesia, and Myanmar all originated from Thailand (because these countries themselves do not have enough sugarcane to produce to meet domestic demand and are imported from Thailand to have CO form D certification facility) resulted in more than 1 million tons of imported sugar from Thailand, accounting for 97.7%. After 11 months, the amount of sugar imported from Thailand into Vietnam has reached 1.3 million tons. According to data on export prices, the average raw and refined sugar from Thailand to Vietnam is only $334/ton.

"The above export sugar price is clearly not only much higher than the price of sugar sold in the domestic Thai market, but also lower than the cost of sugarcane (crop year 2019-2020, the processing target of the Thai sugar industry is 9.13 cane/sugar - the cost of sugarcane is $410/ ton.) This further highlights the dumping nature of Thai sugar when it enters the Vietnamese market. It is not equal in competition in the sugar industry," Mr. Loc said.

The Vietnam Sugarcane and Sugar Association said that a record volume of low-priced sugar entered and completely dominated the market. Facing this impact, Vietnam's domestic sugar price plunged to the lowest level in the region, lower than production costs. Sugar produced from sugarcane is hardly sold.

From a business perspective, Mr. Tran Ngoc Hieu, General Director of Soc Trang Sugar Company, said that the current status of raw material areas for sugarcane production in Soc Trang is declining. Specifically, it was 8,400 ha in 2017, 7,000 ha in 2018, and 4,800 ha in 2019. This year, there are only about 2,400 hectares left and is expected to be under 2,000 hectares by 2021.

The main reason for the decreasing acreage and quantity of sugar cane purchases pointed out by Mr. Tran Ngoc Hieu is that Thai sugar is imported through official channels at low prices, leading to unhealthy competition with Vietnam's sugar. Mr. Hieu also mentioned that there are costs that cannot be changed "overnight", most of the raw material areas are small and fragmented.

"Light at the end of tunnel"

Regarding the difficulties of the sugar industry, the Prime Minister issued Directive 28/CT-TTg dated July 14, 2020 on the implementation of solutions to develop Vietnam's sugar industry in a new situation to ensure fair competitive conditions for the sugar industry and sugarcane farmers. On that basis, the Ministry of Industry and Trade has initiated an investigation to apply anti-dumping and anti-subsidy measures to some sugar products imported from Thailand.

"This move immediately had a positive impact, the domestic sugar price gradually recovered. The Ministry of Industry and Trade had just started to investigate, but also brought"light at the end of the tunnel"to the sugar industry in Vietnam," Mr. Loc said.

Speaking more about this issue, Mr. Le Trieu Dung, Director of the Trade Defense Department (Ministry of Industry and Trade) said that the domestic manufacturing industry provided information and evidence that imported cane sugar products from Thailand is being dumped into Vietnam and the Thai Government has been maintaining a number of subsidy policies for farmers' sugarcane growing activities and the sugar industry.

In September 2020, the Ministry of Industry and Trade issued Decision No. 2466/ QD-BCT on the investigation and application of anti-dumping and anti-subsidy measures against some sugar cane products originating from Thailand.

Previously, in June 2020, the Ministry of Industry and Trade also issued Decision No. 1715/ QD-BCT on the investigation and application of anti-dumping measures on some liquid sugar products extracted from starch maize (also known as HFCS) havingC/Ofrom China and Korea.

In the long term, economist Le Dang Doanhsaid that the sugarcane industry needs to restructure, improve productivity, and invest effectively in reducing costs in order to compete fairly. Both investment in cultivation and processing of the sugar industry must be restructured.

"If we process well, molasses and bagasse can make products that are profitable for business and have lower costs. Other countries do the same and do business very well. Integration is inevitable. If we integrate into the international economy, we have to live with the world, we must accept competition for development.Do not think that strict regulations on quality, standards and environment become barriers to restricting exports or preferential policies for imported goods are a barrier for domestic products. Enterprises must see this as a pressure to change themselves and grow,” said MrDoanh.