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VFA’s monopolistic power kills rice export competition

Tu Hoang
Monday,  Mar 20,2017,22:22 (GMT+7)
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VFA’s monopolistic power kills rice export competition

Tu Hoang

Rice bound for foreign markets. CIEM says VFA’s monopolistic power in rice export activity has effectively compromised competition among exporters - PHOTO: TL

HANOI - The Vietnam Food Association’s (VFA) monopolistic power in rice export activity has effectively compromised competition among exporters, according to a report by the Central Institute for Economic Research (CIEM).

Dr. Dang Quang Vinh, lead author of the report, said at a seminar held in Hanoi last Saturday by CIEM that Decree 109/2010/ND-CP on rice export operations had created a restricted playing field with rice exporters facing so many barriers to market entry.

To get a certificate for rice export, enterprises are required by the decree to have at least one warehouse with a minimum capacity of 5,000 tons, a 10 tons per hour milling facility, and have exported rice for 12 consecutive months.

VFA effectively monopolizes rice export activity in the country, leading to unhealthy competition between rice exporters. After signing export contracts, exporters must register with VFA within three working days.

Worse still, Vinh noted, Document 1101/TTg-KTTH signed in July 2013 by then-Deputy Prime Minister Hoang Trung Hai tasks the Ministry of Industry and Trade with approving the planning of rice exporters.

The conditions for approval of the planning include limiting the number of rice exporters at 150 nationwide and revoking rice export certificates from enterprises failing to ship abroad 10,000 tons a year for two consecutive years.

The planning must prioritize enterprises having material farming zones, and cooperating with or buying rice from rice farmers but restricts rice trading houses from participating in export activity as much as possible. In the long run, key rice exporting firms will be required to develop their own material zones, and cooperating with or placing orders directly with rice farmers, according to the document.

At the seminar, CIEM President Nguyen Dinh Cung threw his weight behind an order on Decree 109 revisions which the Prime Minister gave during a conference on solutions to sustainable development of the rice sector in An Giang Province. “His order must be strictly obeyed.”

The decree must be amended in a way that complex rules on rice export must go and the planning of rice exporters must be eradicated, PM Nguyen Xuan Phuc said, and the VFA must be deprived of the powers which it should not have been given, such as those concerning the setting of the floor rice price and the allocation of rice export quotas, to allow market forces to decide.

Economist Pham Chi Lan said at the seminar that the rice trade policy was seen as the worst such policy. “VFA is an example of group interest,” she stressed.

In the report, CIEM proposes removing the centralization of contract negotiations and treating VFA as a normal industry association rather than a powerful state agency. VFA should be equally represented by all stakeholders in the rice value chain, especially rice producers, said CIEM.

The Ministry of Industry and Trade has abandoned the planning of rice exporters but Decree 109 still abounds with tough conditions.

In 2010, before Decree 109 came out, more than 200 enterprises were active in rice export, said CIEM. However, the figure has now fallen to 145.

 

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