Vietnam rice exports down as government sales mode backfires

TN News

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With government-to-government deals, a major mode of rice export, declining, Vietnam is likely to miss this year's target of shipping 7-7.2 million tons.

Last year the country surpassed Thailand to become the world's biggest rice exporter, shipping 7.72 million tons, and had hoped to increase the number to eight million tons this year.

But it has cut the target twice due to decreasing orders from traditional importers like the Philippines, Malaysia, and Indonesia, with whom it makes G2G agreements.

Exports under this mode made up only 13 percent of the rice exports by value in the first nine months, down from 44 percent two years ago.

As of October end rice exports have been estimated at 5.73 million tons, valued free-on-board at US$2.47. That represents a decline of 11.6 percent in volume and of 14 percent in value.

Shipments to the Philippines in the first three quarters are estimated at 353,000 tons, down more than 65 percent year-on-year.

Exports to Malaysia declined by 36 percent.

Registered exporters have yet to receive any orders from Indonesia.

News website Dan Viet quoted an unidentified source in the Ministry of Industry and Trade as saying that country has no plans to buy rice from Vietnam this year since it has adequate stocks.

It said the Vietnam Food Association fears that the country cannot meet the target of 7 million tons unless shipments to Malaysia and Indonesia improve.

China has remained Vietnam's biggest rice buyer, importing 1.76 million tons in the first three quarters, but a whopping 70 percent of it was in the form of unofficial cross-border transactions.

But VFA Chairman Truong Thanh Phong told the media that he had no idea how low this year's exports would have been without them.

G2G

A World Bank report on trade facilitation in June said there are "few indications" that the government wants to reduce the role of state firms in rice trading.

Rice trade expert Nguyen Dinh Bich said analysts have for long warned the industry against the reliance on G2G sales to traditional markets and urged it to diversify its markets with private exports.

But the rice industry's efforts to expand markets have been "too tardy," he said, while Vietnam's major customers are becoming more self-sufficient and are also strengthening private sales.

A VFA senior executive, who asked not to be named, said many rice exporters are suffering but did not provide details.

Analysts said state firms and their affiliates continue to have a domineering role in the industry, adding that the G2G model makes firms less competitive and prone to trouble when orders fall.

New markets

African has taken over from Asia as Vietnam's biggest rice importer, accounting for 70 percent of the shipments this year.

The country signed deals for shipments of 300,000 tons a year to Guinea in West Africa from last April through 2015, and 60,000 tons to Comoros in East Africa from last August through 2015.

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