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Foreign hands set to stir up the local rice market
Foreign-invested companies in Vietnam maybe allowed to trade and distribute rice in Vietnam.
Deputy Prime Minister Hoang Trung Hai has agreed in principle with the Ministry of Industry and Trade’s (MoIT) proposal on allowing foreign-invested companies in Vietnam to trade and distribute rice in the country, according to the government office’s Document 5173/VPCP-QHQT.
Prior to that, Germany’s Vietnam-based Metro Cash&Carry Company and a number of foreign-invested companies proposed the MoIT to ask the government to allow them to trade and distribute rice in Vietnam.
Hai’s agreement means that Vietnam will likely open its rice trading and distribution market to foreign companies before January 1, 2011, when the nation will open its door to foreign companies to engage in the distribution and export of rice under World Trade Organization commitments.
Foreign companies have been banned from trading rice in Vietnam because of fears that they would be able to buy up too much rice. “The government’s move will help stop the year-to-year monopoly in rice trading and distribution in the Vietnamese market,” said Pham Hoang Ngan, a rice analyst from the Ministry of Agriculture and Rural Development’s Information Centre for Agriculture and Rural Development.
Rice trading and distribution are dominated by the Vietnam Northern Food Corporation and Vietnam Southern Food Corporation, while the country’s rice exports were managed by the Vietnam Food Association (VFA), which allocates other companies with export quotas. “The government’s move is suitable to the market law, as Vietnam is integrating more deeply into the world’s economy. Fiercer competition would thus appear between local and foreign companies,” Ngan said.
“That is good news for foreign companies like ours because they will be able to expand their rice market shares. Rice farmers may see higher profits from foreign buyers,” said Metro Cash&Carry Vietnam key account executive, Phan Thu Huyen. “We want to gain a bigger market share in rice distribution in Vietnam. We will be able to set up our big supply and output systems,” Huyen said. In fact, companies like Metro have already been allowed to distribute rice for years, but on a retail basis only.
Vietnam has encouraged foreign companies to invest in rice production and processing. However, Le Hung Tin, head of the Ho Chi Minh City-based representative office of Dong Thap Agricultural Products Import- Export Company, said that the government’s move would put his company under stress. “Many local companies will be faced with difficulties. While rice trading and distribution are managed by the two food corporations, their exports are managed by the VFA, so they will be put under the pressures from foreign rivals,” Tin said.
“It is difficult to compete with local companies, but far more difficult to compete with foreign ones, which have better distribution experience and strong financial ability,” he said. Ngan added that the government’s move would increase Vietnam’s rice supplies because farmers would likely boost production thanks to increasing buyers. “More supplies will mean that consumers will likely benefit from cheaper prices,” Tin said.
All rice trading enterprises buy rice from farmers via a number of intermediary channels. As a result, profits for farmers are often little, while profits for exporters are large. Hai told the MoIT to ask the government to revamp the existing regulations on rice trading and distribution in a manner that would ensure transparency of the government’s management over the rice sector. The government recently asked relevant agencies to revise the Article 10 of Decree 12/2006/ND-CP on the purchasing and sale of goods, in which, rice exports will be defined as a business with specific conditions, such as the need for investors to have business licences, warehouses, processing facilities and strong capital.
vietnamnet, vir
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