New opportunities for sugar industry

Monday, 2021-04-05 11:37:41
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It is forecasted that sugarcane area will continue to drop in the 2020 – 2021 crop, posing risk of shortage of raw materials for sugar factories. (Illustrative image)
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NDO – Vietnam’s sugar industry has encountered many difficulties due to falling prices and declining cultivationareas, causing inefficiency and losses to many sugar mills for many years.

In particular, after the ASEAN Trade in Goods Agreement (ATIGA) took effect from January 1, 2020, tariff on sugar imported into Vietnam has decreased from 85% to 5%. Thus, the quantity of imported sugar has increased dramatically, affecting domestic production of sugar.

According to the Vietnam Sugarcane and Sugar Association, due to declining prices of sugarcane over recent years, farmers have switched to planting other crops, resulting in planting area being reduced from 300,000ha to 130,000ha.

At the same time, sugar imports have risen, creatingheavy impacts on domestic sugar production. Sugar factories produced nearly 750,000 tonnes of sugar in the 2019 - 2020 sugarcane crop while the annual average is more than 1.2 million tonnes.

Through statistics of the authorities, the total amount of sugar imported into Vietnam in 2020 soared dramatically to more than 1.5 million tonnes. Due to difficulties and losses, there are only 29 sugar factories in operation while many others are forced to close.

It is forecast that sugarcane area will continue to drop in the 2020 – 2021 crop, posing risk of shortage of raw materials for sugar factories.

To remove difficulties for the sugar industry, the Ministry of Industry and Trade issued Decision No. 477 on February 9, 2021, to apply anti-dumping tax and temporary anti-subsidy tax to several sugar products originated from Thailand. This Decision came into forcefrom February 16 and will be applied for a 120-day period.

After Decision 477 took effect, there have been positive signs for the domestic sugar industry. Accordingly, the selling price of domestically produced sugar has increased from VND1,500 to VND2,000 per kg compared to the end of 2020. Meanwhile, the purchasing prices of raw sugarcane have also risen by10% to 13% compared to the previous crops.

The increases in raw material purchasing prices will encourage sugarcane growers to expand their acreage to ensure raw materials for the stable operation of sugar factories and gradually restore the domestic sugar industry.

Vietnam is one of the major producers and consumers ofsugar in the world and in ASEAN. The imposition of trade defence tax is a timely intervention aimed at creating equal competition for domestic sugar mills.

However, it cannot be denied that the domestic sugar industry still has many shortcomings includingfragmented cultivation area, causing difficulties to the application of science - technology and mechanisation to production; outdated technology of sugar factories, leading to high production costs and selling prices; and alack of diversification of post-sugar products.

Therefore, the sugar industry needs to accelerate restructuring in the long term to improve its competitiveness and expand the market.

Furthermore, sugar factories need to invest in modern technology equipment, diversify products after sugar, anddevelop policies to support sugarcane farmers.

They should invest in mechanisation and expansion of large fields to develop concentrated raw material areas toimprove productivity and quality of sugarcane while promoting links between farmers and enterprises to ensure profits for farmers and the consumption ofproducts. In addition, the authorities need to continue to control sugar imports and strictly handle any trade fraud.