Vietnam still fumbling for policy to control rice exports

Vinafood 1 and Vinafood 2 want to be exclusive bidders for government-to-government (G2G) rice export contracts, but analysts warn of the dangers of a monopoly. 

The Vietnam Food Association (VFA) chair has told rice exporters that they must not sign export contracts with some G2G markets between June 6, 2017 and the day Vinafood 1 and Vinafood 2 end transactions and complete contracts.

Vinafood 1 and Vinafood 2 will be the only two rice export companies to represent Vietnam to bid for rice contracts to G2G markets. 

VFA cited a Ministry of Industry and Trade (MOIT) document in December 2010 as saying that except for Vinafood 1 and Vinafood 2, the two largest rice export corporations, other businesses must not export rice to G2G markets unless they receive MOIT licenses.

Duong Van Chin from Loc Troi Group has criticized the VFA’s request, saying that the rice export management policy that VFA wants to apply will distort the rice value chain.

He emphasized that the government wants to restrict the monopoly enjoyed by Vinafood 1 & Vinafood 2 and remove complicated procedures to encourage capable businesses of exporting rice. 

Vinafood 1 and Vinafood 2 want to be exclusive bidders for government-to-government (G2G) rice export contracts, but analysts warn of the dangers of a monopoly. 

If many businesses can export rice in large quantities, this will encourage domestic production and benefit farmers. But VFA aims to strengthen its monopoly, thus hindering the development of the rice industry.

He said that Vinafood 1 and Vinafood 2 were given too many rights, including the right to export rice under G2G contracts. However, they mostly offer low bidding prices, accept unfavorable conditions and cannot improve the position of Vietnamese rice in the world market.

Vinafood 1 and Vinafood 2 make big profits with G2G export contracts. The export price of $300-400 per ton and profit of $10 per ton is enough for them to pocket big money thanks to the high export volume of millions of tons.

Meanwhile, the former head of the Research Institute Nguyen Van Nam has been cautious about commenting on VFA’s move.

He said MOIT had its reasons when appointing Vinafood 1 and Vinafood 2 to represent Vietnam in negotiating for G2G rice export contracts several years ago.

Many enterprises registered to join the bids, but offered very low prices and gave up the bids, thus badly affecting the image of Vietnam rice. The enterprises were mostly small ones. Even the enterprises which had only several thousands of tons also registered to join the bids. 

However, he admitted that the monopoly in exporting rice needs reconsideration.