Over 50% of the current 211 rice exporters are likely to lose their export licenses from October 1 when a new decree is to take effect demanding stricter criteria.
Under Decree No.109 issued by the Ministry of Agriculture and Rural Development, rice exporters are required to have a storage capacity of at least 5,000 tons and husking facilities with an output of at least 10 tons per hour.
Storage and husking facilities have to be located in cities and provinces that have the rice granaries or international ports to serve rice exports.
According to the Vietnam Food Association (VFA), the decree will help solve unfair competitions and unprofessionalism but nearly a half of the current 211 rice exporters are small companies with poor capacity and will likely fail to meet the new standards.
Truong Thanh Phong, head of VFA, explained that each of these small exporters has exported less than 1,000 tons in the first six months of this year. One of them even exported a mere 700kg.
“Though the companies serve as rice exporters, they even do not have any storage or husking facilities,” he said.
These companies create unfair competitions against other exporters, damaging the industry and hurting rice farmers, he added.
“Some [small] firms even accept a modest profit of only US$2 per ton and lower their price to win contracts,” he said, “But this will enable foreign importers to impose low prices on other firms as well.”
Recently, a company has lost it contract to export rice at $400 per ton because another firm offered it at just $390, he said.
Vo Hung Dung, director of the Vietnam Chamber of Commerce and Industry, applauded the new regulations, saying it is essential to curb unfair competitions and other problems in the rice exporting sector.
Just 80-90 firms able to export rice
With the new rule in place, there will only be 80 and 90 companies that can meet all the requirements, VFA said. Seven have managed to obtain the certificates by now.
Even worse, authorities at provincial levels demand exporters to satisfy additional criteria.
“The decree only stipulates that exporters must have storage and husking facilities but the provincial Department of Industry and Trade [at many provinces] requests that the companies must also have rice polishing and drying machines.”
When the companies objected, provincial officials replied they just followed the agriculture ministry’s instruction in evaluating technological equipments.
Pham Van Bay, director of An Giang Agricultural and Foods Import Export Company, said the exporters find it hard to have the storage and husking facilities in the same location.
“Rice companies usually put their husking facilities in the rice production area to save cost, while their storages are located elsewhere,” he said.