Will the Vietnamese dairy industry "sink" in TPP if standards are not transparent?

The government needs to have specific regulations to clarify standards for milk types in Vietnam so that the dairy industry can firmly enter the TPP.

The demand for milk consumption in our country in the past decade has been assessed to have grown highly, always reaching double digits and in the long term this demand will continue to grow. So in the context of deep integration with the world, especially joining the upcoming TPP agreement, what opportunities will our country's dairy farming and milk processing industry have and what risks will it face?

Only meets nearly 34% of domestic demand

According to Associate Professor Dr. Hoang Kim Giao, the Large Livestock Association (Vietnam Livestock Association), the average milk consumption per person in the world is 103.4 liters. This figure varies between regions and countries. For example, in Asia it is 65.6 liters, in Europe it is 205 liters, and in Oceania it is 336 liters. In our country, the average is only 18 liters/person/year, of which 6.1 liters of fresh milk is 34% of the total converted milk consumption, in China it is 35 liters, and in Thailand it is 25 liters.

Dairy farming in Vietnam is facing many challenges when entering TPP.

Some market advantages are: The demand for milk consumption in Vietnam has been increasing in recent years; a large labor force, agricultural by-products, and a variety of processing industries; the consensus and support of authorities at all levels and the efficiency of dairy farming of the people in recent times is higher than some other livestock sectors. In particular, up to now, the dairy farming industry in our country has only met nearly 34% of the demand for milk for consumption, the remaining 66% must be imported. Thus, the milk market in our country is still very large. Developing dairy farming provides milk not only for the domestic market but also has the potential to export to neighboring countries such as Laos and Cambodia.

However, the immediate problems that the dairy farming and milk processing industry in our country faces, according to Associate Professor Dr. Hoang Kim Giao, are: Unfavorable climatic and ecological conditions for dairy farming; our country does not have good dairy cow breeds, and lacks experience and knowledge in dairy farming; most dairy farms are small, scattered, unprofessional, and difficult to manage diseases and food safety. The cost of producing one liter of milk in our country is higher than in Australia, New Zealand, and the US.

With that situation, in the context of deep integration into the world economy, "The signing of the TPP trade agreement is a huge challenge for the dairy farming industry. Because at that time, livestock products including milk from countries with advantages such as New Zealand, Australia, the US... will be imported into our country." - Associate Professor, Dr. Giao emphasized. According to a study by IFCN (International Farm Network, 2013), the average cost of milk production in the world is estimated at 46 USD/100 kg of raw fresh milk, Australia and New Zealand is 35 USD, the US is 41.4 USD, Europe is 40-55 USD... and in Vietnam, depending on conditions, the cost of producing 100 kg of fresh milk is about 42-52 USD.

Furthermore, the connection between dairy farmers, dairy companies, milk purchasing and processing enterprises is considered not good. The lack of clarity and transparency in milk standards and in advertising and propaganda about dairy products has led to misunderstandings among consumers...

Confusion between fresh milk and reconstituted milk: SOS?

As a business directly involved in dairy farming and milk processing in Vietnam, Mr. Hoang Cong Trang, Deputy General Director of TH Group, frankly said: Joining TPP, Vietnam is considered to be able to benefit the most, including the agricultural sector. However, "benefits do not come naturally when we are not prepared and take advantage of opportunities for development. There will be no opportunities if our goods, especially food, do not have a brand and do not meet strict food safety standards".

Looking at the current situation of Vietnam's dairy farming industry and milk market, Mr. Trang analyzed: With dairy farming and milk processing activities, the three countries in the TPP, Australia, the US, and New Zealand, have achieved high standards of safety and quality. Their dairy products have been and are being imported into Vietnam in large quantities, mostly in the form of reconstituted powdered milk (because they are easy to transport, easy to preserve, and low cost). In that context, TH Group's strategy is to proactively produce raw materials, promote domestic livestock farming, increase the domestic market share of fresh milk, and aim for export.

However, the domestic fresh milk market is facing many challenges when the TPP comes into effect. According to Mr. Trang, the import of powdered milk into Vietnam will take place in a massive trend if the price drops and the tax rate to Vietnam is 0. This will break the current milk consumption trend towards using fresh milk (the world's consumption trend). Moreover, the import of fresh milk will be more favorable than before. "This is disadvantageous for domestic fresh milk brands" - Mr. Trang worries.

In fact, for imported fresh milk products, consumers always believe that the product is really 100% fresh milk, while for domestic liquid milk, there is confusion between re-mixed fresh milk and fresh milk due to current regulations (Circular 30 on milk standards). "This takes away the legitimate advantage of domestic fresh milk right at home and creates more advantages for imported goods" - Mr. Trang predicted.

Regarding this point, Dr. Nguyen Thi Thu Hang (Institute for Economic and Policy Research) pointed out: In Vietnam, reconstituted milk is mainly used because fresh milk only meets about 28% of the demand. Reconstituted milk is cheaper, but in fact, the price of reconstituted milk sold on the market is not significantly lower than fresh milk. An important reason is that the regulations on milk labeling are not strict. The market is not transparent, so consumers still suffer.

Therefore, both Mr. Trang and Ms. Hang suggested that the State should have specific regulations to clarify standards for milk types in Vietnam. Milk standards need to be more transparent and clear to ensure fairness for the Vietnamese fresh milk industry, protect Vietnamese consumers and return development opportunities and healthy competition to the Vietnamese livestock and agricultural industries. This also helps businesses protect their brands, and it is also a solution to "rescue" households and farms that are raising dairy cows./.

According to VOV