Vietnam to fully divest from sugar mills this year

The Vietnamese Government has set a target of fully divesting from sugar mills by the end of this year, aimed at raising competitiveness in the country’s sugar industry, Chairman of the Vietnam Sugar and Sugarcane Association (VSSA) Mr. Pham Quoc Doanh said.

The government has been reducing State holdings in domestic sugar refineries since 2014 and at present only has investment in one company. 

Mr. Doanh said the government now plans to sell all its 70 per cent holding in the Vietnam Sugarcane and Sugar Corporation II by the end of this year, to complete its full divestment from the sugar industry.

“Thanks to this divestment, production and business in the sugar industry will be the fairest of all industries,” Mr. Doanh said. 

Primarily based on sugarcane, Vietnam’s sugar industry is considered less competitive than Thailand, which ranks as the world’s second-largest exporter.

Mr. Doanh said the price and quality of its sugarcane, rather than processing technology, are responsible for Vietnam’s sugar industry being behind Thailand’s. 

Thai plants buy a ton of sugarcane for $26 while Vietnamese refiners pay $40-$53, and Thai sugarcane also has a higher sugar content.

The price difference is due to the Thai government supporting farmers. Its Ministry of Agriculture and Cooperatives receives $1.5-$2 million each year from the Thai government to conduct research and development on high quality sugarcane, which when grown are then sent to Thai farmers.

Thailand also has a policy regulating the domestic sugarcane sales price, so it never exceeds the export price. 

This allows domestic demand to offset any fall in export prices and encourages the development of the sugarcane industry. 

The sales price at Thai markets is the same as in Vietnam. 

“Clearly, both countries have their own advantages and disadvantages,” Mr. Doanh said.

Under commitment made with the WTO, every year Vietnam must import a fixed quota of sugar from foreign countries, which increases 5 per cent annually. 

Last year the import quota was around 85,000 tons. The Ministry of Agriculture and Rural Development said that every year Vietnam produces more than 1 million tons. 

The Ministry of Industry and Trade said that Vietnamese enterprises have faced difficulties amid the continuous rise of sugar prices, making them unable to buy sufficient sugar for processing activities. 

Many traders also tend to stockpile sugar while waiting for price hikes, exacerbating the shortage.

Vietnam refined 1.24 million tons of sugar in the cane crushing season that ended in September 2016, down 12.7 per cent from the 2014-2015 season, due to drought and salinity in the southern region. 

Its 2016-2017 sugar output has been projected to rise 13 per cent, to 1.4 million tons, the sugar association said.