One year after the day the government’s Decree 109-- stipulating the conditions for rice exporters; the market has witnessed the leave of a lot of enterprises.

Under the decree, an enterprise must have at least one husking workshop with the minimum capacity of 10 tons per hour, and have at least one storehouse with the minimum capacity of 5000 tons.

Small enterprises not welcome on the playing field

According to the Vietnam Food Association VFA, by the end of 2011, about 150 exporters had been licensed as satisfying the requirements set up by the Decree 109. Meanwhile, before the decree came out, there had been 200 export companies. Of the 150 licensed enterprises, 82 licenses were granted to the “big guys” who are the members of VFA. This shows that the new decree is not the playing field for sickly guys.

Pham Phong Phu, Director of the Phu Binh Food Company in Dong Thap province, said that it is very easy for the Southern Food Corporation (Vinafood 2) or VFA’s member companies to build a storehouse with the minimum capacity of 5000 tons or a husking factory with the minimum capacity of 10 tons per hour. However, it would be a burdensome for private enterprises with weak financial capacity.

Nguyen Phuc Anh, Director of Tan Tai III Food Enterprise in Cai Be district of Tien Giang province, said that she once intended to build a storehouse and husking workshop, but she later decided to give up the plan because of the lack of capital.

In fact, not only private small enterprises, but the enterprises with high export volumes, also meet big difficulties. Dr Le Van Banh, Head of the Mekong Delta Rice Institute, said that in the past, enterprises only began collecting materials and polishing rice after they signed contracts with importers. Therefore, the Decree 109, which requires enterprises to have big storehouses and big factories, cannot be satisfied by many enterprises.

Dr Banh said that though enterprises have to make heavy initial investment to build storehouses and husking factories, enterprises would be able to control the supply sources and keep the active voice in the negotiations for the contracts. 

In fact, of the 150 enterprises which got licenses, only 66 got the licenses for long term export (5 years), while 79 private enterprises only got the licenses for one year export, because their factories have not been completed yet.

In the latest news, the Ministry of Industry and Trade has agreed to extend the deadline of the Decree 109 implementation to October 1, 2012.

Businesses hesitant to develop storehouses

All enterprises can see the obvious benefits of the storehouses. However, enterprises only build storehouses and factories to meet the requirements of the Decree 109, while none of them wants to expands the factories or build the factories with bigger than required scale, though this is within their reach.

Also according to Dr Banh, in the last many years, Vietnam has been trying to build up storehouse system, factories to serve the processing and export. However, the plan has not brought the desired effects.

“The plan to build up the storehouses for storing 4 million tons of rice has been half done,” Banh said.

Meanwhile, Doan Xuan Hoa, a senior official of the Ministry of Agriculture and Rural Development, has predicted that the plan would keep going at a snail’s pace until the end of the year.

It is the lack of the storehouses which causes the big losses to farmers. India, Thailand and Pakistan all store rice for 5-6 months at least and sell rice under their plans. Meanwhile, Vietnam has been well-known as selling fresh rice.

Source: TBKTSG