Smuggled sugar a bitter blow for domestic mills in Vietnam

Cheap, smuggled sugar from Thailand has bankrupted three of 10 factories in Vietnam’s Mekong Delta, industry insiders say.

Vietnamese sugar factories’ inventories are currently estimated at 670,000 tons, up 200,000 tons over the last two months.

The director of a cane sugar company (member of Vietnam Sugarcane and Sugar Association), who did not want to be named, complained: “It is difficult to sell domestic sugar products as smuggled sugar from Thailand is dominating the market”.

In Southwestern provinces, smuggled products from Thailand are currently sold at VND 10,000 – 10,500 ($0.3-0.4) per kilogram, which is lower than the domestic prices by VND 2,000-3,000 ($0.08-0.1) per kilogram.

Leaders of sugar factories in the Mekong Delta say no tax is paid on smuggled Thai sugar, while domestic businesses are obliged to pay various tax types of taxes, fulfill social welfare responsibilities and support sugarcane farmers, resulting in higher production costs.

"At this price, domestic sugar manufacturers have no chance to compete in the market, and they have to sell at a loss. Smuggled products are widely available”, the director noted.

“The problem is that despite the long distance and costs involved in getting the goods across Vietnamese border, smuggled goods are offered at lower prices than domestic products”, said Nguyen Bao Ve, agronomist and professor at theCan Tho University.

He said high production costs of Vietnamese farmers, low productivity, and uncompetitive manufacturing technology were also part of the problem.

Ve said it was essential to restore fair trade and take immediate action to prevent smuggling. Simultaneously, the companies themselves need to reform, reduce costs, and cooperate with farmers to reduce sugarcane production costs, he said

He also warned that apart from improving productivity and innovating technology, to match daily consumption of 6,000 tons of sugarcane, mechanizing production was of great importance. He also noted that Cambodia has fully mechanized sugarcane farming, while 60 percent of Vietnamese sugarcane farming was conducted manually.

Pham Quang Vinh, Chairman of the Can Tho Sugarcane Company, said different sugarcane varieties and farming techniques had to be deployed to better utilize the strengths of Southwestern areas with abundant sunlight, fertile land and sufficient water resources. From this, high quality and high yielding varieties can be selected to match different farming areas, he said.

Vietnam was ranked 14th in acreage and sugar yield in 2017, constituting 1.16 and 0.85 percent of the global total. In terms of scale, Vietnamese production is just 16 percent of Thailand’s. Meanwhile, Thailand is ranked second in sugar exports worldwide, with prices 31 percent lower than that of Vietnamese sugar.