Vietnam Food Association risks losing rice monopoly

  • 06:33 - 2018/04/10

Following recent criticism of the Vietnam Food Association (VFA), the Ministry of Agriculture and Rural Development (MARD) has reduced the association’s power, with further plans to promote fairness in rice exports.
 
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Vietnam Southern Food Corporation`s workers load rice pallets at Saigon Port, HCM City

Deputy Minister of Agriculture and Rural Development Ha Cong Tuan affirmed that the VFA should no longer be able to allocate rice quotas among domestic firms and Decree 109 regulating the country’s rice exports must be amended to facilitate the change. So far, the decree dictates that the VFA can only allocate rice export quotas under centralised contracts on the basis of agreements between Vietnam and importing countries. But since 2017, the association has chosen to focus more on auctioning off these quotas as a separate enterprise seeking its own profits instead of as a representative of rice producers.

As a matter of fact, Vietnam is now only under one specialised contract to export rice to Cuba, but only one enterprise was assigned by the government to implement this. "Therefore, in essence, the VFA has no role in allocating quotas at the moment," said Tuan. Regarding the proposal to halt the VFA’s alleged abuse of power in allocating rice export quotas, Tran Van Cong, deputy director of the Agro Processing and Market Development Authority, said that although there are some inadequacies, it is not possible to completely diminish the role of the VFA in keeping rice production stable.

In recent years, the VFA has done a good job of regulating import and export of foodstuffs, including rice, he added. Cong said that the MARD will work closely with the Ministry of Industry and Trade to review Decree 109, in order to promote and encourage more private businesses to participate in rice exports, which he hoped would lessen the VFA’s influence in this field.

Prior to that, the Vietnam Institute for Economic and Policy Research (VEPR) claimed in a March 2018 report that the VFA only represents the interests of State-owned enterprises (SOEs) in the agricultural field and does not hold itself responsible for the private sector’s or individual farmer’s benefits. The VEPR said that the association was hampering the development of its members via the use of monopolistic government-to-government contracts.

Nguyen Duc Thanh, VEPR’s director, argued that VFA’s allocation decisions are based on a top-down, non-consensual and involuntary approach that doesn’t include consultation with member firms, while its price floor policy has caused losses for private exporting enterprises and indirectly pushed down the price level at which rice is purchased straight from small-time farmers.

Therefore, VEPR’s representatives suggested that the Government actively replace the outdated VFA policies with radical reform in the rice export sector, setting up a new institutional policy-based system that is disciplined, fair and transparent. In particular, the revised Decree 109 that the Ministry of Industry and Trade is drafting should reduce the VFA’s role to that of a trade association, instead of a quota cartel. Experts from the VEPR said that in order for the rice industry to develop sustainably in the long run, there should be production contracts between rice farmers and enterprises.

In early March, the VFA said that in addition to its current functions and rights, in the near future, the association will focus on increasing the number of members to fight against price pressure and anti-dumping, as well as restrain unfair competition affecting production, efficiency and prestige of the Vietnamese rice industry. Deputy Minister of Agriculture and Rural Development Tran Thanh Nam requested the VFA to organise production and cooperative development, especially in areas of specialised rice cultivation, and initiative export quantity to specific markets, while maintaining quality assurance and food safety.

Source: VietNamNet

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