Sugar industry tasted the bitter of ATIGA

Although sugar prices have been falling for the past half of the year, many sugar mills are unable to sell one kilogram of the thousands of tons of sugar due to many large buyers are expected by 2018 for removing import-tax of sugar under the roadmap for the implementation of the ASEAN Trade in Goods Agreement (ATIGA). It can be seen that the losses will mainly belong to sugarcane farmers.

Factories do not “die”

Mr. Pham Quoc Doanh, Chairman of the Vietnam Sugar Association (VSSA), said that sugar has been selling at VND16,000 / kg that must sell at VND12,000 / kg by sugarcane mills but the results are still negative. "Recently, three mills in the Mekong Delta have been in sugarcane season for nearly half a month, producing 10,000 tonnes of sugar without selling any kilograms. Large sugar buyers do not buy because they want to wait for the remove of sugar import quotas on January 1, 2018, at the same time import tax rate is cut down to 5% under the ATIGA Agreement. They want to buy cheap sugar imported from Thailand. This is the contrast between consumers and manufacturers,” Mr. Doanh said.

According to the VSSA, the domestic sugar industry has been struggling for smuggling from Thailand. In the coming time, if all tariff quotas have been removed since 2018, the flow of foreign sugar will create many difficulties to the sugar industry. Currently, the country has 41 sugar mills with a total designed capacity of 150,000 tons per day, increased 12.7 times compared to 1995.

In particular, the number of factories with a capacity of 2,000-3,000 tons/day is 22 factories. According to the calculation of the world, the sugar factory must have a capacity of 6,000 tons/day or more that is able to get economic efficiency. " 2018, the scenario is that factories with large capacity, well prepared will be able to face and compete. However, due to the fierce competition, sugar mills certainly will not be able to keep the price of sugarcane from 800,000 to 1.1 million per ton as today. Without state protection, the plants will have to push the price of sugarcane down to lower prices because sugarcane prices account for 80% of the cost of sugar production. Besides, the factories with small capacity, backward technology will be difficult but not “dead” because they can switch to raw sugar refining and not buy sugarcane from farmers,” said Mr. Doanh.

Farmers are disadvantage the most

It is easy to see that, in the story of the sugar industry, under the application of the ATIGA schedule, the losers would most likely belong to sugarcane farmers. With a total sugarcane area of 300,000 hectares, it is predicted that there will be about 33,000 farm-households with 1.5 million workers will be in difficulty.

In order to remove the difficulties for the sugar industry, the VSSA has sent a petition to the Prime Minister for requesting to delay the implementation of commitments in the ASEAN under the ATIGA Agreement to 2022, or earlier in 2020. Instead, the volume of sugar import quota will continue to increase to 10% compared to 5% in 2017. In addition, the VSSA also proposed that the import duty outside tariff quotas will also be reduced by 50% compared to 40% for raw sugar and 45% for white sugar.

“In fact, there are now countries that have signed free trade agreements but do not follow the roadmap. However, we just dared to prolong the commitment period and still increase the import of sugar under the tariff industry,” Mr. Doanh said.

On October 6, 2017, the Government Office issued a written notice to the Prime Minister on the proposal of the VSSA. Accordingly, the Prime Minister assigned the Ministry of Industry and Trade to chair with the Ministry of Finance, the Ministry of Agriculture and Rural Development and local authorities to consider the recommendations of VSSA, report to the Prime Minister before October 30, 2017. However, despite the deadline of October 30, Mr. Doanh said, the Ministry of Industry and Trade still has not completed the report. The reason given by the Ministry of Industry and Trade is that there are still mixed opinions on the proposal to delay the implementation of the ATIGA in the ASEAN for sugar products as proposed by the VSSA.

According to Mr. Doanh, in fact, apart from pressure from the ATIGA Agreement, the factories themselves are also trying to invest for integration such as changing sugarcane varieties, implementing mechanization of cultivation, diversifying products from sugarcane… However, the factories can not solve all themselves but they need the hand of state with the policy of synchronous development. "For example, there should be a fund for sugarcane development. Currently, most countries have this fund. In addition, with the sugar industry, sugarcane plays a very important role. In the policy of sugarcane, each year, Thailand spent $US 2.5 million for sugarcane seed, while Vietnam's sugarcane industry was not created conditions. Besides, Vietnam has no policies for the products made from sugarcane. From sugar production to ethanol production is easy. Brazil has a policy when sugar prices are high, they produce sugar, while as it is low, they produce ethanol...”, said Mr. Doanh.

According to VSSA: Over the past time, the sugar industry has not only achieved the target of 1 million tons, contributing actively to the domestic sugar production, creating jobs for 33,000 workers, 1.5 million workers involved in planting sugarcane but it also contributes to export turnover. Specifically, in the first nine months of this year, sugarcane enterprises have exported 44,000 tons of sugar to 28 countries around the world.