Imposing self-defense tax to increase competitiveness of domestic goods

From September 7, 2013, Vietnam officially applied safeguard measures on imported vegetable oil products, including refined soybean oil and refined palm oil (HS codes 1507.90.90, 151.90.91, 1511.90.92, 1511.90.99). The safeguard tax will be applied from May 2013 to May 2017 with a starting tax rate of 5% in 2013 and will gradually decrease each year to 2% in 2017.

The domestic cooking oil industry is losing at home. Photo by Nguyen Hue.

According to statistics from the General Department of Customs, in recent years, the amount of imported oil into Vietnam has increased sharply. If in 2009 the amount of imported cooking oil into the Vietnamese market only reached nearly 267 thousand tons, in 2010 it was over 312 thousand tons, then in 2011 it was nearly 389 thousand tons (an increase of nearly 24% compared to 2010), in 2012 it was nearly 567 thousand tons (an increase of nearly 46% compared to 2011).

The sudden increase in imported oil has caused considerable damage to the domestic manufacturing industry. Since the beginning of 2012, the domestic manufacturing industry has had to cut production output to 1/3 compared to the previous year. The decrease in production has led to a sharp decline in market share, revenue, profit, etc.

According to statistics, in 2012, the sales volume of domestic enterprises decreased by 11.78% compared to 2011, pulling the market share of domestic cooking oil production enterprises from 52% (in 2009) to 27% (in 2012), and the market share of imported goods increased from 48% to 73%. Meanwhile, in the 3 years from 2009 to 2011, the market share of imported cooking oil and domestically produced cooking oil was always at the same level with a ratio of 50-50. According to calculations by experts, domestic sales volume decreased by about 30%, leading to domestic production being forced to cut back, reaching only about 24% of the designed capacity in 2012, down about 30% compared to 2011 and the lowest year in the period 2009-2012.

According to experts, the rapid increase in imported cooking oil is partly due to the new tariff schedule applied by the ASEAN Trade in Goods Agreement (ATIGA) which took effect from January 1, 2012. Accordingly, the tariff schedule for refined and crude vegetable oil has been reduced from 5% and 3% respectively to 0% for exported goods from ASEAN countries. The removal of tariff barriers on vegetable oil has created conditions for the increase of imported goods into Vietnam. In the context of slow development of the vegetable oil production industry, the reduction of import tax to 0% in 2012 has created a pressure beyond the calculation of the domestic production industry.

According to a survey by the Competition Management Department (Ministry of Industry and Trade), refined soybean oil and refined palm oil products produced by domestic manufacturers and imported from abroad are basically no different. However, the Vietnamese vegetable oil industry is still dependent on 90% of imported raw materials, especially palm oil, with increasing input prices and continuously increasing production costs, so although businesses try to cut costs, they still cannot compete on price with imported goods. In particular, in 2012, the price of imported oil suddenly dropped by about 12%, significantly changing the "competitive conditions" of imported cooking oil with domestically produced oil. In recent times, the domestic oil production industry has been forced to cut about 20% of its direct production workforce compared to 2011 to cut costs.

Due to the inability to compete with imported goods, the revenue and profit of the domestic cooking oil industry has decreased sharply. In 2012, the revenue of the domestic cooking oil industry decreased by nearly 38% compared to 2011, resulting in a profit decrease of 31% compared to 2011. Besides, although the amount of exported cooking oil only accounts for about 5% of total sales, in 2012, the export of the cooking oil industry also decreased by 34% compared to 2011.

The domestic vegetable oil industry is being squeezed by imported goods, causing a sharp decline in market share, leading to stagnant production and wasted investment. This shows that domestic goods are under a lot of competitive pressure due to the trend of massive influx of foreign goods. Therefore, imposing self-defense tax on imported cooking oil is considered a move by state management agencies to protect the domestic vegetable oil production industry from the massive attack of imported cooking oil.

However, according to economic experts, the trend of goods flooding the market following the opening of regional markets will continue to increase in the coming time. Thus, not only the cooking oil industry is facing difficulties but other manufacturing industries are also facing many risks. Therefore, there needs to be an appropriate plan to increase the competitiveness of domestic goods to avoid businesses from suffering heavy losses.

According to forecasts, the demand for cooking oil will continue to increase in the coming years. In order to meet the market demand, domestic cooking oil producers have made great efforts to invest in machinery and equipment, increasing the capacity of the entire industry to 1 million tons/year by 2014. With this capacity, the domestic cooking oil industry can meet 100% of the domestic market demand.

According to.haiquan.online.PH