09:47 | 02/03/2015 Trade
Deputy Minister of Industry and Trade Nguyen Cam Tu, who is also chairman of the Steering Committee for International Economic Integration, has granted an extensive elaboration on the real situation and solutions for the sugar sector in the country in response to media regarding the recent imports of sugar produced by Vietnamese Hoang Anh Gia Lai group's factory in Laos's Attapeu Province in the 2013-14 crop.
The state offers too many incentives to the sugar sector
From my perspective, since the establishment of the sugar sector, the state has always paid special attention to developing and protecting the industry by high tariffs barriers. Even though Vietnam joined the World Trade Organisation (WTO) and implemented the roadmap to reduce tax under WTO commitments, the sector has been protected by the state.
Recently, under ASEAN nations’ common commitments for integration process, Vietnam has offered preferential tariffs of 5% to member nations for white and raw sugar while it offers an import tax of just 2.5% for Laos.
It can be said that at present, the sugar industry has been protected by the State compared to other important sectors such as garment and textile, footwear, rice and coffee.
Four shortcomings of the sugar sector
Firstly, high price is the most problem for the industry. Over the years, Vietnamese people have to consume sugar at a price nearly doubling the figure compared to the world market. The situation is attributed to four main factors including lack of renovations from relevant agencies for the development, lack of high-yield breeds of sugar, poor cultivation techniques and obsolete and small scale production technologies.
Secondly, factories are not keen to support farmers when the price of sugar fluctuates in the country. Therefore, farmers are willing to cut down sugar canes to grow another plants to make profit.
Thirdly, there remain shortcomings in the method of business. Businesses often complain about the quality of sugar products from factories. In addition, sugar factories have not built their direct trade ties with foreign partners and have to rely on broker businesses to export their products abroad, leading to low productivity, high product costs and price.
Fourthly, there is a lack of co-ordination. Although the sector has established the Vietnam Sugar and Sugar Cane Association (VSSA), member businesses lack effective cooperation to make breakthroughs.
These are the main reasons which make the sugar price too high. Therefore, there should be fundamental renovations in the industry to meet the requirements for international integration. Integration under the roadmap will be the driving force to make reforms which need the involvements from state management agencies, associations and businesses.
To face competition in the context of integration, weak businesses should merge and establish big companies like the recent restructuring of the banking sector. Therefore, let potential companies such as Hoang Anh Gia Lai buy these factories to make fundamental changes.
Sugar imports from Laos
The sugar factory in Laos is invested by Hoang Anh Gia Lai group- a Vietnamese enterprise with loans from Vietnamese banks. It has generated jobs to thousands of people from both nations and most of the factory staff are Vietnamese.
It can be said that in fact, Hoang Anh Gia Lai has just leased land from Laos and its products are “Made-in Vietnam”. The success of the group’s factory in Laos means that a Vietnamese enterprise has been successfully. If the enterprise has not operated effectively, Vietnamese banks will lose money and workers will lose their jobs, causing the burden for the national economy.
In fact, sugar imports from Laos by Hoang Anh Gia Lai are “Made in Vietnam” sugar. The sugar sector and local businesses should not wait for the State’s protection any longer. Instead, they should restructure and merge to compete with the group.
If businesses can compete with a successful enterprise like Hoang Anh Gia Lai, they can secure a firm foothold under the pressure of stiff competition from thousands of businesses in the region and the world especially the ASEAN Economy Community which is expected to establish late this year. In addition, the signed and upcoming free trade agreements will pose challenges for businesses in the time ahead.
Special Vietnam-Laos relationship
The relationship between Vietnam and has been nurtured for thousands of years. Especially, over the past seven decades, the time-honoured relationship has been fostered by top leaders from the two parties, states and people.
International integration is the correct policy of the Party and State. The process has posed both challenges and opportunities which have required the Government, associations and other sectors including sugar sector to make reforms for rapid development and help the national economy catch up with the region and the world. Our real motto is “Reform or failure in the international economic integration”.
Source VOV News