New decree removes tough conditions for rice exports

11:20 | 29/09/2018 Trade

The government has officially removed tough conditions for firms to conduct rice export activities in Vietnam, a move expected to lure more exporters, including foreign ones, and create a fairer playing field in the domestic rice export market.

new decree removes tough conditions for rice exports
Decree 107/2018/ND-CP will make it more favourable for firms to engage in exporting rice

If nothing changes, Chung Seo Jun, export sales manager of the Republic of Korea (RoK)’s S.K Vegetable and Fruit Trading Company, will visit Vietnam this November to seek opportunities to export Vietnamese rice to the Eastern Asian market.

“We will meet with Vietnam’s Ministry of Industry and Trade to discuss our plan to cooperate with local firms to export rice to our nation,” Jun told Nhandan Online. “Currently, we are annually spending hundreds of millions of US dollars purchasing rice from Lao and Thailand. The rice will be used for both home use and industrial purposes.”

In fact, Jun has visited Vietnam several times to seek rice export opportunities, but failed, due to existing tough conditions. “However, I’ve learned that the Vietnamese government has eased the conditions, and we will come to Vietnam again to seek opportunities.”

On August 15, the government enacted Decree 107/2018/ND-CP on rice export businesses, which will take effect on October 1, 2018. This decree, which clearly defines that a foreign-direct investment firm shall be licensed and perform rice export business activities under this decree and other laws of Vietnam, has eased conditions for rice export business by stipulating that traders, both Vietnamese and foreign, are entitled to engage in rice export activities when they have at least one warehouse to store rice, and at least one mill to process the rice.

This warehouse and mill can be the assets of the traders or leased by the traders, with a lease contract covering at least five years.

Decree 107 will replace the existing Decree 109/2010/ND-CP on rice export business, which has, over the past eight years, come under fire by firms due to the tough conditions it imposes on the rice export business.

Specifically, under Decree 109, an eligible rice trader must be lawfully established and register their business under law and have special-use warehouses to store a minimum of 5,000 tonnes of rice and at least one rice mill to process at least 10 tonnes of rice per hour.

The rice warehouse and mill must be owned by the trader and located in a province or centrally run city which has export commodity rice or an international seaport with rice export activities at the time the trader applies for a certificate.

Rice exporters shall regularly maintain a circulation reserve equal to at least 10 per cent of their rice exports over the previous six months.

According to Nguyen Duc Thanh, head of the Vietnam Institute for Economic and Policy Research, all existing stringent conditions for exporting rice should have been removed long ago.

“While many businesses want to engage in rice exports, they cannot due to the many conditions that they will never be able to meet under Decree 109,” Thanh said.

At present, there only about 100 rice exporters allowed to export rice in Vietnam.

According to Dang Quang Vinh from the Central Institute for Economic Management’s Department of Competitiveness and Business Environment, all these conditions under Decree 109 are “very strict obstructions for many enterprises which want to export rice, and this prevents Vietnam from exporting high-quality rice and building its rice brand name on a global scale.”

Dao The Anh, vice head of Food Crop Research Institute Vietnam, also said, “Many local firms and cooperatives want to export high-quality rice, but they cannot meet all the conditions of Decree 109.”

For example, Vien Phu Company in the southernmost province of Ca Mau has Hoa Sua rice brand-name, but it cannot export the products directly as it cannot meet all the said conditions. Thus the firm has indirectly exported rice via big companies that fully meet the conditions.

In another case, Phuoc Thanh Bay Map Production and Trade Company in Ho Chi Minh City said it will cost about VND500 billion (US$22.73 million) for the company to satisfy the conditions, and this job is almost impossible, which has many years’ experience in doing trade with the US market.

“It is Decree 109 that has been partly responsible for Vietnam’s inability to develop a global rice brand name, because it prevents the rice sector’s competitiveness,” Anh said.

Meanwhile, Chung Seo Jun from S.K Vegetable and Fruit Trading Company expected that Decree 107 will make it more favorable to co-operate with these Vietnamese firms.

“While many rice exporting nations have their own global rice brands, Vietnam — the world’s third largest rice exporter (after India and Thailand) — does not. Foreign firms like us will not be able to export rice in Vietnam if the existing conditions continue,” Jun said.

Vietnam exported 5.79 million tonnes of rice, worth US$2.62 billion last year, and 4.4 million tonnes worth nearly US$2.2 billion in the first seven months of this year.

Theo NDO