VietNamNet Bridge - Sugar production – the industry which now enjoys the highest protection level from the State – is expected to ‘die’ when Vietnam cuts the sugar import tariff to five percent in 2018 as committed.

Minister of Agriculture and Rural Development Cao Duc Phat said that sugar is one of the delicate products which the State tries to protect at the highest possible level when negotiating free trade agreements (FTAs).

Only 81,000 tons of sugar, equal to 6 percent of total domestic demand, can be imported to Vietnam in 2015 within the tariff quota (TRQ). This means that the preferential tariffs of 25 percent (raw products) and 40 percent (refined products) will be imposed on the 81,000 tons. Meanwhile, non-quota imports will bear the higher tax of 80-100 percent.

The domestic sugar industry is also protected by a series of technical barriers.

However, the high protection is believed to cause the death of the sugar industry in the time to come, when Vietnam has to cut the import tariff from 80 percent to 5 percent.

The problem is that Vietnamese-made sugarcane, which makes up 70-80 percent of the sugar production cost, is more expensive than Thai sugarcane by VND300,000 per ton.

Regarding sugar processing, a report showed that only one-third of businesses use modern technologies and machines.

According to Nguyen Quang Hop from Hung Thinh Company, the sugarcane yield in Vietnam is low, 47.6 tons per hectare, much lower than the average 65.3 tons per hectare in the world.

He said mechanization is the only solution to the problem. However, it is nearly impossible to carry out  mechanization if sugarcane is grown in small separate land plots.

Pham Hong Duong, chair of Thanh Thanh Cong Sugar JSC, fears that Vietnam would lose its domestic market to the hands of foreign businesses, especially ones from Thailand.

Sugar is distributed via two major ways – supermarkets and other retail channels. It is very costly to distribute products through supermarkets, which always demand the profit of 10-20 percent. Meanwhile, sugar manufacturers only expect a modest profit of 10 percent in auspicious years.

Meanwhile, the biggest distributors in the market, such as Huong Thuy and Phu Thai, have been taken over by foreign groups. The foreign investors have been clearing the way to bring products from their home countries to Vietnam.

Do Thanh Liem from the Vietnam Sugarcane and Sugar Association argued that the domestic production is not protected by the State at all.

“Though the government imposes high tariffs on official imports, it keeps the doors open to hundreds of thousands of tons of smuggled sugar from Thailand,” he said, adding that sugar companies do not need protection, but need reasonable policies.

TBKTSG