Challenges and solutions for the sugar industry

(Baonghean) - According to the Vietnam Sugarcane and Sugar Association (VSSA), the sugar industry is facing a difficult time when the ASEAN Trade in Goods Agreement (ATIGA) takes effect from the beginning of 2018.

Enterprises must buy sugarcane at a price of 830,000 to 850,000 VND/ton (ensuring farmers a small profit); after processing, selling to the market must be at 15,000 VND/kg, while the price of sugarcane has dropped to 12,000 VND/kg but is still unsold, the amount of sugar in stock at factories on August 15 was about 555,000 tons, 350,000 tons higher than the same period last year.

Bringing raw materials into sugarcane press at Song Con sugar factory.

The reason given by VSSA is that domestic consumption has slowed down due to the ASEAN Trade in Goods Agreement (ATIGA) which will take effect from the beginning of 2018; accordingly, Vietnam must abolish restrictions on sugar imports and reduce sugar import tax to 0-5% instead of the current 30%.

VSSA also warned that if the tariff quota on sugar is removed according to the ASEAN integration roadmap, sugar factories with small capacity and outdated technology will face difficulties and may switch to importing raw sugar for refining to maintain production and no longer purchase sugarcane from farmers.

The pressure will be heavier on more than 300,000 hectares of sugarcane growing area nationwide, especially in some specialized areas. A part of the sugarcane area will be converted to other crops. This will lead to the closure of factories due to lack of raw materials, which could lead to the collapse of the entire sugarcane industry and the community of people who live on sugarcane....

Therefore, VSSA has proposed that the Government postpone the implementation of the above commitment until 2022 or 2020; at the same time, increase the import quota to 10% compared to 5% in 2017; reduce the import tax rate outside the quota to 40% for raw sugar and 45% for white sugar.

It is not only now that the sugar industry is struggling and crying out for help due to competitive pressure from foreign sugar. The sugar industry is creating jobs for 33,000 workers and 1.5 million sugarcane growers, with the export turnover of cane sugar in the first 9 months of 2017 being 44,000 tons to 28 countries.

The integration roadmap is causing the automobile market to experience an unprecedented price drop in the decades of protection, and this will inevitably affect the sugar industry as well as other industries. If Vietnam arbitrarily stops its integration commitment roadmap, it will not only damage its national reputation, but also miss the opportunity to expand its market to other countries, giving up the corresponding incentives that countries give it according to the signed integration agreement.

According to VSSA, the most disadvantaged people are sugarcane farmers.

Furthermore, it is also contradictory and difficult to compare and balance to stop and delay the integration roadmap for the profit of a few dozen factories using old technology and small scale, and a few tens of thousands of workers, maybe millions of farmers growing and processing sugar without community connection, while ignoring and overwhelming the interests of nearly a hundred million consumers and other sugar production and consumption industries.

The challenge of integration is harsh and the solution to this problem of harmonizing interests must be found in social consensus and proactively overcome with technical measures and high responsibility. Accordingly, on the one hand, the state and enterprises, farmers need to proactively coordinate to review planning, stabilize concentrated raw material production areas and close the supply chain, strengthen close links, organize methodical investment, use new varieties, advanced processes and technologies, innovate operating models and governance mechanisms, reduce costs, increase sugar content in raw materials... to improve productivity, quality, price and brand competitiveness of the sugar industry.

On the other hand, authorities and associations need to pay attention to building and effectively maintaining legal technical barriers, specifying and diversifying national standards on food hygiene and safety requirements, and strengthening inspection, testing, and quality control; flexibly using domestic tax and fee tools (VAT and special consumption tax, etc.), controlling temporary import and re-export, preventing domestic smuggling, tax evasion, and strictly punishing violations of fair competition management.

Dr. Nguyen Minh Phong