Vietnam’s sugar industry is expected to face a great deal of difficulties as the country will drop tariffs on imported sugar from ASEAN under the ASEAN Trade in Goods Agreement (ATIGA) in 2020.
Farmers harvest sugarcane in Tuy Hoa, Phu Yen province. (Photo: VNA)
“With ATIGA starting in January next year, we [sugar producers] are still notclear on Vietnam’s integration policy for its sugar industry. As of now,smuggled sugar has already flooded the market in large quantities,” K.V.S.R.Subbaiah, general director of KCP Vietnam Industries Limited Co. – a sugarproducer based in central Phu Yen province – told VnEconomy.
Subbaiah said the price of sugar is expected to plunge 15-20 percent afterATIGA. This may drive sugarcane prices to a point where it’s no longerprofitable for farmers to grow them. As farmers switch to different crops,sugar plants would be forced to shut down due to the lack of input.
Nguyen Truong Chinh, director of the Tuy Hoa Sugar Plant, said for the lastthree years sugarcane prices have averaged 800 VND per kilogramme (3.4 UScents), which is considered just barely acceptable by many farmers.
Even at that price point, this year has seen several localities droppingsugarcane trees for other crops. Chinh said his plant’s sugar field has beenreduced from 8,000ha last year to just 5,500ha.
Any further drop in price, he said, mayjust be the straw that breaks the camel’s back and possibly even triggers anexodus of sugarcane farmers from the industry.
It has been a few bleak years for sugar producers as increasing sugar surplusand dwindling demand in the domestic market made it difficult for plants tostay in production. In just two years, the number of sugar plants in Vietnamhas dropped to 36 from 46 in 2017, among which 17 were reporting losses.
Higher production cost was said to be the bane of domestic players, especiallyafter ATIGA when they are forced to lower prices to compete.
“Production cost for Vietnamese producers remained too high at 50 USD per tonneas compared to 30 USD in Thailand, 18 USD in Australia and 16 USD in Brazil,”said Professor Vo Tong Xuan, an agriculture expert and scientist.
Experts have long been urging the Government to come up with a comprehensivesolution to rescue and develop the sugar industry, starting with greater effortto stop smuggled sugar and higher tariffs on imported liquid sugar. Long-termstrategies include merging sugarcane land plots to take advantages of economyof scale and planting quality sugarcane varieties to raise productivity. –VNS/VNA