Foreign firms’ appetite for rice exports

Under Vietnam’s World Trade Organization (WTO) commitments, from 2011 wholly foreign-owned firms will be eligible to handle rice processing and exports in the Vietnamese market.

Industry experts said the move would inspire market expansion and enhance the value of Vietnamese rice. However, some raised concerns that a large portion of Vietnamese commercial rice would be in foreign  traders’ hands and the profit margins created by Vietnamese rice would pour into foreign pockets.

Song Hau Food Company director Le Minh Truong said there would be a tough competition between domestic and foreign rice exporters in 2011 and foreign firms held the advantage.

“Foreign players prevail over local peers in export markets, global distribution network and familiarity with world trading practices,” Truong said.

Besides, they could source US dollar loans at reasonable lending rates of 4-5 per cent per year, while local firms have to source loans at high lending rates of 17-20 per cent, Truong said.

VFA’s deputy chairman Pham Van Bay said to survive local rice exporters would have no other alternative than restructuring to enhance competitiveness through innovating technology, shaking hands with farmers to establish stable material areas or expanding output markets.

Bay said that foreign players could not immediately jump into Vietnam and local firms needed to race against time to grow stronger before stepping into competition with foreign players.

The VFA revised rice export guiding prices by six times from January 7 to March 21, 2011. Accordingly, the floor export price of five per cent broken rice effective from March 24 was offered at $490/tonne and 25 per cent broken rice $470/tonne, down $30 and $28 per tonne, respectively, compared to those on January 7, 2011.