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New decree on rice export weeds out the inefficient and, encourages big enterprises
While big enterprises applaud the newly issued decree on rice export management, small traders complain that the new legal document will destroy them.
The decree – the “filtration”
The first decree stipulating the requirements on rice traders and exporters has been issued after many discussions and adjustments. Analysts believe that the new decree No 109 will help “filter” rice enterprises, and only the best ones will remain on the market.
A HCM City-based rice export company said that the requirements set by the new decree will surely pose big difficulties for enterprises. It is clear that very few enterprises have rice husking workshops with the minimum capacity of 10 tons of rice per hour and can maintain the regular stocks of 10 percent of export volumes
“A company which exports 5000 tons of rice must have the compulsory reserve of 500 tons, or nine billion dong. Most enterprises now have to rely on loans to purchase and export rice. Meanwhile, it is now very difficult to borrow money, while the interest rates are overly high. How can they arrange money to store rice?” a businessman explained.
As for other enterprises, which have rice husking workshops, storage depots and the husking capacity that meet the new requirements, the Decree 109 is considered the golden opportunity to expand their business. Pham Van Tho, Director of Truong Tho rice husking factory in Thoai Son district in An Giang province, said that the new decree will help him boost exports. Truong Tho has four standardized husking workshops which have the total capacity of 150,000 tons of unhusked rice a year (110,000 tons of rice), while it is building a rice storage covering an area of 7000 square metre.
According to Tho, in the time to come, many traders, who cannot continue exporting rice because they cannot meet the requirements of the decree, will try to contact the enterprises, which have husking workshops and depots, to seek their cooperation. Tho said such cooperation will benefit both sides, because the traders have wide network and can easily mobilize capital.
The new decree will enforced beginning from January 1, 2011, but enterprises will have a “grade period” of nine months, during which they can improve their production workshops and get necessary licenses from management agencies. After the grade period, if enterprises still cannot meet the requirements, they will have to shut down their export activities.
One decree, many purposes
Though the government’s decree only mentions the requirements on rice trade and export companies, it is clear that benefitting farmers is one of the main goals of the decree.
Experts say that the new decree would generate big changes in the rice market. It will restructure the rice exporters, and prepare the domestic rice production for the “landing” of foreign enterprises when Vietnam has to open its market in early 2011.
In the past, the rice prices went into chaos many times, and this was blamed on traders. The traders did not have rice depots, did not have processing workshops and did not have enough rice stocks. Only after they signed export contracts with foreign importers, they rushed to collect rice from farmers, thus pushing the domestic prices up and causing uncertainties to the market. However, with the new decree, the problem will be settled.
Vo Hung Dung, Director of the Can Tho Branch of the Vietnam Chamber and Commerce and Industry, also said that only a limited number out of the 250 existing rice export companies will be able to meet the newly set requirements.
Dung stressed that with the new decree, when foreign enterprises join Vietnam’s market, they will also have to make serious investment in the production and processing, like Vietnamese enterprises.
He said that the regulation in no way violates WTO rules, because the same conditions are set for domestic and foreign businessmen.
vietnamnet, tbktsg
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