Trade surplus, but local firms miss out on action

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Farmers unload a truck of rice in the Mekong Delta

In 2012 Vietnam had a trade surplus for the first time in two decades, but it hardly brought cheer to domestic producers or exporters.

Exports exceeded imports by US$780 million, but the biggest beneficiaries were foreign-invested businesses who accounted for 54 percent of revenues.

Exports were worth nearly $114.57 billion, an 18.2 percent rise from the previous year, while imports edged up to $113.79 billion.

Economists said this was a clear sign of the economic distress, with many local businesses having large stockpiles and being forced to stop imports of feedstock and intermediate goods.

Vietnamese firms' imports fell by 6.7 percent as exports rose by a mere 2 percent, mostly in garment and textile.

Agricultural products like rice, tra fish (pangasius), coffee, rubber, and cashew, and garments and textiles remained the major export items.

Data from the General Statistics Office showed that in many sectors while export volumes rose, earnings did not.

Experts blamed this on companies' willingness to undercut competitors and some entrenched quality and other problems.

Le Van Banh, head of the Rice Research Institute of the Mekong Delta, said the country's rice production system has never been efficient, it still sells low-quality rice, and farmers still live in poverty.

"We have quality seeds, our farmers are good, but businesses and farmers are not on the same page," he said.

Vietnam exported 7.72 million tons of the grain, an 8.3 percent rise, but earned only $3.45 billion, a nearly 2 percent fall.

It translates into 44 cents for a kilogram, down from 50 cents in 2011.

The Vietnam Food Association said 53 percent of the exports were of average or low quality.

Experts said for rice the scale of production should be increased and a brand name established.

Huynh Van Thon, general director of the An Giang Plant Protection JSC, the main provider of cultivation services in the Mekong Delta, Vietnam's largest rice basket, said Vietnamese farmers usually face pressure from intermediaries to reduce prices.

"And one thing that has been bothering me for years is Vietnamese rice is yet to have a brand name. It is always some village's rice," Thon said.

The experts said there has been a failure to create a production model with close links between scientists, farmers, and traders.

"As a leading exporter, Vietnam needs to care more about the money earned," Nguyen Dinh Bich, former member of the Vietnam Institute for Trade, said.

"It does not mean anything when one exports a lot for little money."

Deputy Minister of Industry and Trade Nguyen Thanh Bien said Vietnam's rice value can be raised with the use of quality seeds and adoption of technologies.

Tra fish goes dumped

Traders of tra fish are earning themselves a bad name abroad by undercutting each other.

Prices offered by Vietnamese exporters have dropped to $1.8-2.5 a kilogram from the average $3 in 2011, despite increasing wages and other costs.

Tra fish used to be a favorite of many foreign importers since it was liked by most consumers around the world.

But they have started to lose interest because of the volatility involved in it: Import prices could plunge within a day, leaving importers who bought it at earlier prices with expensive consignments.

Jean-Charles Diener, director of Ofco Sourcing, which distributes Vietnamese tra fish in Europe, said most importers no longer want to invest in the product since their profits have taken a beating after Vietnamese exporters kept cutting prices one after another.

"European exporters are fed up with Vietnamese exporters' predatory pricing," Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Processors, admitted.

Traders have to sell fillet at at least $2.7 a kilogram to make profits, he said.

"Many exporters tend to cut prices as soon as a foreign partner does not respond to their first offer, but low prices are not always what importers look for," Hoe said.

Foreign businesses said Vietnamese exporters could cooperate with each other to set high prices, benefiting both themselves and farmers, given that they account for more than 80 percent of global tra fish supply.

The unhealthy competition has caused farmers to suffer losses of VND3,000-5,000 (14-24 US cents) per kilogram of fish.

Tran Huy Hien, a tra trader based in the delta's Dong Thap Province for more than ten years, said the government should limit the supply to around 50 large processors to make it easy for setting prices and improving quality.

Many exporters are focused on quantity and export untrimmed products, a retrograde step, he said.

There are 136 tra exporters in the Mekong Delta.

Some of the larger players have called for diversifying products to recapture the market. Only 1 percent of the $1.8 billion worth tra exports were processed products, with the rest being fillet.

They also want a floor export price for tra based on the farming situation at home and global demand.

They are confident that business will still be good in Europe, the country's biggest tra market, if prices are 30 to 40 percent higher than the current export prices.

Exports mean little

Vietnam became a member of the Trans Pacific Partnership last year along with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, and the US.

But many developed markets like the US and Canada have said they will only have low tariffs for products made largely within a country, meaning Vietnam's garment industry may not benefit much.

Textile and garment products topped the country's export list for the fourth consecutive year at $15.09 billion, nearly 8 percent up, according to Vietnam Textile and Apparel Association.

But local producers' dependence on imports for feedstock increased to the tune of $11 billion, leaving the sector with a trade surplus of around $4 billion, well below the $6.7 surplus in 2011 and the target of $7 billion for last year.

With foreign businesses accounting for more than half of 2012 exports, 4,000 Vietnamese textile and garment firms shipped only half of the exports.

Le Tien Truong, vice chairman of the association, said the industry is set to increase the use of local materials, by developing textile and dyeing, to raise the industry's trade surplus to 50 percent this year.

Le Quang Hung, chairman of the Saigon Garment Production and Commerce JSC, said one foreign customer early this year allowed his company to use local materials, and that was the first time.

It was a good sign but also a challenge since the textile sector at home is still underdeveloped, he said.

"Many textile and dyeing businesses have been refused licenses everywhere they went since authorities were afraid of environmental pollution.

"So I think some government policies are needed here," Hung said.

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