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Lots of heat but no more light on Vinafood2 dumping charge
The Vietnam Food Association (VFA) says Vinafood 2 did not dump rice on the world market, but VFA’s explanation doesn’t satisfy other rice exporters. Deputy Trade Minister Nguyen Thanh Bien has promised to investigate.
Murky explanations
Contrary to charges in a widely noted Tien Phong newspaper expose, the Southern Region Food Corporation, commonly referred to as Vinafood 2, did not break Vietnam Food Association rules on rice export pricing, a VFA deputy chairman assured the press on October 7.
Vinafood 2 is a state-owned enterprise that in 2008 reported earnings of over $2 billion from rice exports alone. Its CEO, Truong Thanh Phong, is also the current head of VFA.
Nguyen Tho Tri, the VFA executive, said a misunderstanding occurred because VFA did not update information on the rice floor price on its website. That made it seem that its biggest member was selling below the permissible minimum price. In fact, Tri said, when Vinafood 2 and three provincial rice companies agreed to export rice at just over $400 per ton in August, they were in accord with VFA guidance posted late in July.
Tri said also that prior to July 13, 2009, the floor price was ‘flexible.’ This means that though VFA set a floor price, enterprises still could sell rice to foreign customers for less ‘if the export deals were reasonable.’ Enterprises were expected to clear such deals through VFA. “Therefore, even though the floor price was set at $410 per tonne, enterprises still could sell rice at below the price if they could persuade VFA,” Tri said.
Tri’s explanation has not been accepted by rice exporters in Mekong Delta. Tuoi tre newspaper quotes some rice exporters as saying that they never receive an official notice of minimum sales prices from VFA. “It’s always oral,” one said, “and the mechanism for adjusting it is really obscure. Whatever VFA sets up must be respected by all enterprises. How dare Tri say that those who can ‘persuade’ VFA will be able to export rice at any price?”
Other businesses asked why VFA keeps adjusting the floor price for rice exports when Vietnam’s rice price is always the lowest and Vietnam does not have rivals in the lower end of the white rice market.
What’s the role of Saigon Food?
The VFA executive also defended Vinafood 2’s sale of rice via a Singapore subsidiary, the “Saigon Food Co.” Vinafood 2 set up Saigon Food under the Government’s development strategy and with the approval by the Ministry of Planning and Investment, Tri said. It’s a 100 percent state-owned firm with investment capital of $800,000.
Local newspapers, led by Tien Phong, have pounced on evidence that Vinafood 2 on August 26 sold rice cheaply to Saigon Food, which then immediately cut an export deal with an African buyer for an undisclosed price. The $2 million consignment, purchased by Saigon Food for $406 per tonne, left Ben Nghe Port in HCM City City on August 27.
Tri said that the thing that needs to be clarified here is that Vinafood 2 did not sell rice for less than the floor price. There’s no need to clarify why Vinafood 2 did not sell directly to the African party. In many cases, Tri emphasized, a Singaporean company will have better advantages in negotiating with the partners than a Vietnamese company would.
Other rice exporters scoff at this explanation too. Requesting anonymity, one businessman said that Vinafood 2 does not need to market through a subsidiary, Vinafood 2 itself is been well know as a big exporter able to make direct transactions with foreign partners.
“The act of setting up a subsidiary abroad makes everyone think that this is a way of earning illegal profits,” he said.
Official sources promise investigations
Tuoi Tre newspaper asked a deputy minister of trade, Nguyen Thanh Bien, his thoughts on the matter. “It’s quite normal for a parent corporation to sell products to a subsidiary,” Bien said; “this is not illegal. The worry here is that the parent company deliberately sold rice at the floor price to its subsidiary, so that the subsidiary could resell to the actual buyers at a lower-than-floor price. This may badly affect our rice exports, as foreign partners may make corrupt use of this to force Vietnam’s rice price down.
“We will examine and clarify the case. If enterprises violate the current regulations, they must be punished.”
Tien Phong, meanwhile, queried Le Quoc Dung, a deputy Chairman of National Assembly’s Economics Committee. “I think,” he said, that we need to discuss whether it’s a good idea to let the General Director of Vinafood 2 also serve as Chairman of VFA. Economist Le Dang Doanh is right; this issue should be discussed when the National Assembly meets later this month.
VietNamNet, TT, TP
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