TPP: Maybe not so sweet for Vietnam sugar industry?

According to the Ministry of Finance, growers can take some solace in the fact that should the trade accord be ratified, the government was able to negotiate some degree of limited protection for the industry.

Currently the government imposes an annual quota on imports of 80,000 metric tons, which is equivalent to 6% of the nation’s total demand. Once the quota is reached import duties are raised by 80 and 100% on raw and refined sugar, respectively.

“Should the TPP be endorsed, the quota and import duties would be removed over a 10 year phase-in period,” said Minister Cao Duc Phat of the Ministry of Agriculture and Rural Development (MARD).

But for the majority of Vietnam cane growers, the deal isn't so sweet and the outcome of the deal doesn’t pass muster.

Many growers and market analysts argue the protection is not adequate to save the industry from ultimate doom— as eventually the trade accord opens the floodgates to allow foreign sugar to flow freely into the country’s wholesale and retail markets.

They say the nations sugarcane growers simply aren’t capable of competing head on with higher quality and lower cost sugar produced by markets like Australia and Thailand.

Meanwhile tariffs are only one type of barrier they say and other TPP member nations will erect non-tariff barriers to prevent Vietnam’s sugar exports from gaining anything other than mere token entry within their borders.

A representative from the Vietnam Sugar Association recently noted cheap sugar from Thailand is virtually certain to cause irreparable damage to the nation’s sugar industry.

“For decades, sugar has been smuggled from Thailand into Vietnam at prices much lower than the selling price in Vietnam,” he said. “Currently it comes illegally across the border selling for as much as VND2,000 per kilo less than market.”

“Once the tariffs come down and the market is opened up—then what happens?’

Citing a recent MARD report, the representative said low sugarcane yields are also a big competitive problem faced by the domestic industry.

“For the 2014-2015 season, one hectare of sugarcane produced only 65.3 metric tons in Vietnam while Thailand’s average yield was much greater at 75 metric tons,” the MARD representative accentuated.

Chairman Pham Hong Duong of Thanh Thanh Cong Tay Ninh, a local sugar company, suggested the industry needs some major breakthroughs to be competitive in a post TPP world fully open to foreign competition.

Duong suggested that mechanisms be put in place to insure maximum efficiencies and higher yields in cultivation utilizing the latest modern technology.

MARD Minister Phat agreed saying it was essential for the industry to focus on developing new sugar seeds with higher quality and yields as well as improve coordination within the industry  for balanced production and consumption.

He called on local sugar producers to rethink construction plans at industrial zones to incorporate state-of-the-art technologies to insure the sugar industry gets on par with other countries.

TPP or no TPP, said Minister Phat, maybe the best solution is for the nation’s sugar industry to stand on its own two feet, tackle the challenges head on and get the industry practices up to snuff.