VietNamNet Bridge - The ATIGA (ASEAN Trade in Goods Agreement) implementation will be delayed by two years, which means Vietnam will not remove the sugar quota scheme and tariffs until 2020. 

The ATIGA implementation will be delayed by two years

The negative impact that ATIGA has on Vietnam’s sugar industry became clear in 2017. 

According to the Vietnam Sugar & Sugarcane Association (VSSA), ASEAN countries and China tightened the import of sugar, expecting to benefit when the tariff was cut after ATIGA took effect.

As a result, many sugar mills lowered the selling price to VND12,000 per kilogram, accepting losses. However, sales have been going slowly. By mid-April 2018, the inventory level had soared to 680,000 tons.

The inventory increase, as said by a representative of Lam Son Sugar, was also attributed to imports. The policy on allowing imported sugar temporarily for re-export later has paved the way for a big amount of sugar, about 500,000 tons, to penetrate the domestic market.

A report from VSSA showed that the volume of sugar smuggled over the border  with Thailand is 500,000 tons a year, equal to one-third of the domestic sugar output.

A report from VSSA showed that the volume of sugar smuggled over the border  with Thailand is 500,000 tons a year, equal to one-third of the domestic sugar output.

Fearing that products cannot compete with Thai and Indonesian products, some sugar mills, including Hiep Hoa, Ca Mau and Long My Phat, have suspended production.

What should Vietnam do?

In principle, once the implementation of ATIGA is delayed, sugar companies will have more time and opportunities to improve and become more competitive. However, analysts said there are a lot of things that need to be done in the two years ahead.

Thai sugar, which amounts to 80 percent of sugar imports, for example, is cheaper than Vietnamese. 

Meanwhile, VSSA’s chair Pham Quoc Doanh said with small sugar mills with the capacity of less than 3,000 tons of sugarcane a day, lowering the production cost is impossible.

Therefore, one of the important tasks of the sugar industry development strategy to 2020 is closing ineffective mills.

VSSA estimates that Vietnam would have 15 sugar mills by 2025 instead of 40. It also has urged sugar companies to make post-sugar products such as ethanol and electricity to optimize their profit.

Meanwhile, Vo Tong Xuan, rector of Nam Can Tho University, emphasized the need to organize large-scale production to reduce production cost by 50 percent. He said it is necessary to accelerate the land accumulation process to create large sugarcane fields.

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