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Rice exporters face foreign competition

Vietnamese rice exporters have been warned that they will meet big difficulties in 2011, because Vietnam has to open the food market to foreign enterprises.

According to Truong Thanh Phong, Chair of the Vietnam Food Association, until now, foreign food enterprises had to set up joint ventures with Vietnamese enterprises, if they wanted to trade rice. However from this year, all enterprises, Vietnamese and foreign, will “play in a level field”, as Vietnam has to open the food market to foreign enterprises under the international commitments.

Phong warns that small rice traders are very likely to fall into the hands of foreign companies. There are hundreds of Vietnamese enterprises which export rice, but about 30 which export regularly. Other enterprises operate on a small scale, each exporting several containers of rice a year.

Phong says that the biggest problem that Vietnamese enterprises have to face now is the lack of capital. In principle, they can take bank loans. However, are unable to pay the high interest rates.

“While foreign enterprises can borrow money at the interest rate of 4.5 percent, domestic enterprises have to pay 16.5 percent per annum. Thisputs Vietnamese enterprises in a hugely disadvantaged position,” Phong says.

some experts suggest that Vietnamese enterprises should team up with foreigners to set up joint ventures in order to become stronger. However, according to the Vietnam Food Association VFA, setting up joint ventures is not the optimum solution. At present, a domestic enterprise is teaming up with a Hong Kong’s partner to produce rice. The output is about 500 tons per day. The Hong Kong’s partner is responsible for providing fertilizer and is responsible for the outlet. However, an official from VFA says that such production models had failed in the past.

Experts say that the newly issued Decree No. 109 is the effective “technical barriers” that help prevent the entering of foreign enterprises when Vietnam officially opens the rice export market. Under the decree, foreign enterprises have to have storages and husking factories like domestic enterprise, in order to be eligible for exporting rice.

The Ministry of Industry and Trade has issued the Circular No. 44 guiding the implementation of the Decree 109 on the rice export management.

One of the most important new provisions says that all enterprises which can meet the set requirements, have the right to bid for exporting rice under the rice export contracts signed at the Government level. Until now, exporting rice under this mode has been the privilege of the members of VFA.

The new regulations have also set higher requirements on rice exporters. the companies which meet the requirements on depots, husking factories and processing capacity, can export rice. The new regulations are believed to open a new development stage in rice export. In the past, there were too many small enterprises in the market. Though they did not have rice in stocks, they still signed export contracts with foreign partners. then they tried to collect rice on the market, thus pushing the rice prices up.

Therefore, experts have described the new regulations as a filter which allows to eliminate small and incapable enterprises. the strongest and most capable enterprises will be able to export rice.

Under the Decree 109, rice export companies must have at least specialized depot with the capacity of 5000 tons, and at least husking factory with the minimum capacity of 10 tons of rice per hour.

However, experts say that the first months of 2011 will not see big changes in the rice export. Enterprises will have nine months more to upgrade their material facilities to meet the stipulated requirements. from October 1, 2011 to September 2012, enterprises will have to show the certificate on meeting the requirements for exporting rice. However, during that time, they will still be able to rent depots and husking factories. after September 2012, they will have to stop rice export activities if they do not meet the requirements.

From VietNamBusiness

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