Steps to correct derailed investments
VietNamNet Bridge – Huynh The Nang, general director of Vietnam Southern Food Corporation (Vinafood 2), told The Saigon Times Daily about solutions to settle huge debt and lead the State-run corporation to a new stage of development. Excerpts:
The huge losses of Vinafood 2 and its member companies were among major public concerns last year. Could you clarify the cause?
Huynh The Nang: When I assumed the post of the general director of Vinafood 2 in April last year, I realized that the corporation was coping with a series of problems with its operations and business strategy, including losses in 2013, overdue debt of up to VND600 billion, and wrong investment strategies. Particularly, the spending of thousands of billions of dong on aquatic projects resulted in big losses in the fields of cultivation, processing products for export and feed processing.
However, as Vinafood 2 is a strong corporation in the local rice sector, it can control and solve the losses step by step. In fact, the total debt is not as big as thought.
How will Vinafood 2 be able to cope with the wrong investments?
In the first nine months of my work at Vinafood 2, I and other board members worked out steps to correct the derailed investments and pull the corporation out of tough times. We have tried to improve our governance as this is of paramount importance to the corporation. We have adjusted our business strategy with a focus on consolidating our position on traditional rice export markets and exploring new markets. The board of directors at Vinafood 2 has passed a plan for tapping into commercial rice export markets, which means we have to find importers ourselves rather than counting on government-to-government contracts.
Instead of directly buying rice to export, Vinafood 2 also processes paddy (unhusked rice) into rice for export and this is a breakthrough approach of Vinafood 2 and in the local rice sector. We will invest in large-scale paddy fields to produce quality rice and this approach is supported by the Government. We will kick off this project in the winter-spring 2014-2015 and our large-scale paddy fields will account for 20% of the total area under paddy farming in the Mekong Delta region by 2020. The proportion will be 30% by that year if it incorporates the acreage we are developing in a strategic partnership with An Giang Plant Protection Company (AGPPS).
Last but not least, we will restructure and equitize Vinafood 2, and build a strong brand for our rice products.
How will the corporation balance resources for traditional and new commercial rice export markets?
Achieving this requires us to understand the current situation on the global rice market. Vietnam is now facing fierce competition in the market segment for 5%, 15% and 25% broken rice though there is still high demand for these types of rice from Indonesia, Malaysia and the Philippines. These markets are expected to import a total of approximately two million tons this year, and whether Vietnam will win rice tenders to be organized by these countries or not is still a big question.
But in the medium and long terms, Vietnam will have opportunities to tap into the niche rice market and produce high-quality and fragrance rice for export at some US$200 a ton, lower than the price offered by India, Pakistan and Thailand. To accomplish this goal, the agricultural sector will have to re-organize rice production and provide farmers with high-quality paddy varieties, and improve farming models and logistics facilities.
To export fragrance rice to potential markets such as the United States, Japan and South Korea, Vietnam needs to tighten controls on the residue of chemicals and plant protection drugs on farm produce, including rice, and the local agricultural sector should be funded to do this. It may take the sector years to achieve such improvements but this is a must for the long-term development and building of Vietnam’s rice brands.
In the past years, Vinafood 2 has collaborated with partners to help boost the restructuring of the agricultural sector and cement cooperation between exporters and farmers in the hope that the country can produce better rice for export to more markets.
How is the role of farmers in the rice production chain of Vinafood 2?
Farmers are encouraged to take part in our large-scale paddy field model in order to help us develop an effective production and consumption chain. Participating farmers will be provided with paddy varieties and fertilizer at reasonable prices, and we will buy all their paddy output. We want to share risks and benefits with farmers.
With such plans, how long does it take Vinafood 2 to settle the debt?
Last year, we asked for the Government’s approval to adjust our restructuring and equitization plans within one year to implement our business and financial improvement schemes passed by the Ministry of Agriculture and Rural Development. I think we need one and a half years to solve all the debt problems if everything goes well.