VietNamNet Bridge – The policy on rice subsidy does not benefit Vietnamese farmers and consumers, as rice export prices are even lower than domestic prices.

A research team from the Agriculture Alliance has released a report which shows that subsidies benefit importers and foreign buyers, but not Vietnamese consumers or rice producers.

Dr. Nguyen Duc Thanh from the Hanoi National University, the head of the research team, said that some links in the rice production chain had been supported by the State, including irrigation or infrastructure.

As such, when Vietnam exports rice, it unintentionally subsidizes foreign consumers.

“The tax policies are designed to support irrigation and infrastructure systems. The financial support is not counted when calculating the rice prices,” Thanh said.

“If rice is consumed domestically, the support will be given back to taxpayers. However, we cannot take back support from exports,” he said.

Thanh also pointed out that there were problems existing in the current policies related to rice production and export.

The subsidies have led to overproduction of medium- and low-quality rice and to exports that are sold at low prices.

Meanwhile, the policy on the rice floor price does not bring stable profits to farmers, but discourages them to grow high-quality rice varieties.

Dr. Vo Tong Xuan, the most renowned rice expert in Vietnam, believes that Vietnamese rice products have been undervalued by export companies, which offer low prices in order to compete with Thai exporters.

The problem is that the prices do not reflect the true production costs.

Xuan said the State has to pay hundreds of millions of dollars every year for irrigation works, but the expenses are not counted when calculating rice production costs.

He said the low prices on exports caused farmers losses, but also placed high risks for Vietnamese enterprises.

Sources said that Vietnam’s rice, like other seafood products, could face a lawsuit in the US because the rice is sold at low prices in the market.

Dr. Nguyen Ngoc De from Can Tho University said that export prices are much lower than domestic prices.

“The problem is that if Vietnam does not make rice exports a priority, the domestic market would not be able to consume the entire annual rice output,” De said.

The gap between domestic and export prices is due to an unreasonable taxation scheme.

While the enterprises that distribute rice in the domestic market bear a VAT of 5 percent, export companies don’t have to pay the tax.

He has suggested removing the VAT on domestic rice distribution in order to create a level playing ground for both domestic distributors and exporters.

However, opinions about the subsidies vary. Nguyen Hung Linh, chair of the Vietnam Food Association (VFA), denied that the Vietnamese government was subsidizing the world’s rice consumers.

Linh said that Vietnam could not control rice prices in the global market and could not unilaterally establish export prices, adding that the prices are based on supply and demand.