An Overview of Sugar Industry Development in Vietnam

Before 1995, the sugar production sector was operating with only 9 mills and 2 refineries. In early 1995, the Vietnamese government saw opportunities in the sugar sector, and rolled out the one-million-tonne sugar program. Per its name suggest, the objective was to produce one million tons of sugar by year 2000 to meet the supply of the sugar industry and demand of the Vietnamese people.

With increased incentives and investments, the program saw success by year 2000. There was a significant increase in production volume and efficiency. A total of 44 mills were built and upgraded, with an increased production capacity of around 81,500 tons of cane per day, and there were 2 refineries operating.

In 2017/18, only 36 mills and 1 refinery are operating, with a total installation capacity of 62,300 tons cane/day (average capacity 4,300 tons cane/day). Some mills are utilized to process approximately 90.000 tons of imported raw sugar, and some mills are practicing environmentally friendly forms of electricity production, using cogeneration, ethanol and bio-fertilizer.

Vietnam’s Geographic Distribution of Sugar Mills in 2017/2018:

• North and North of center: 11 mills.
• Center and high land: 14 mills.
• South East of Cuu long river delta: 5 mills and 1 refinery
• South West of Cuu long river delta: 6 mills

Vietnam’s Sugar Production Situation in 2017/18:

• Cane stand areas: 238,000 ha;
• Crushing cane output; 15,430,000 tons
• Sugar production: 1,476,500 tons

Illegal Sugar Imports Poses Threat for The Sugar Industry

In 2017/18, the Vietnam sugar industry is impacted largely by commitment of multi and bilateral trade agreement in the region and the world. Especially, ATIGA trade agreement will directly impact employment, income of more 330.000 farmer-holders and 1.5 million agricultural employees in cane sector.

While world sugar prices were down steeply, there was an increase in sugar smuggling largely from ASEAN into Vietnam. Authorities had put in appropriate measures to prevent and fight smuggling. However, it is estimated that about 500,000 tons of illegal sugar in Vietnam had immensely disrupted stable prices and sugar production in domestic markets. In addition, soft-drinks manufacturers increased imports of the High-Fructose Corn Syrup (HFCS), that are cheaper substitutes of locally produced sugar. This affected the supply-demand of sugar and prices in domestic market, posing a major challenge to the sugar production industry.

Boosting Small-Scale Farmers’ Productivity Is Key

Cane production is solely based on farmers’ land areas; challenges associated are – small in scale and limited opportunity for investment, modernisation in infrastructure, supply chain challenges, irrigation and zoning for mechanical cultivation, land preparation, planting and harvesting. These challenges affect yield, quality, and production of cane. Ultimately, it leads to higher in production costs and competitive advantage loses in the region.

In addition, the sugar industry needs to boost small scale farmers’ production capacity and increase in financial resources. Polices should be implemented to support and encourage investments to help small scale farmers expand, diversify, reduce costs and be competitive in the region.

Challenges in The Vietnamese Sugar Industry:

• High Costs of Cane Production: The cost of producing cane is higher than its neighboring countries and most part of the world. Some countries have competitive advantage through programs to support cane growers, i.e. Thailand.
• Low Productivity of Small Sugar Mills: Smaller sugar mills have an average capacity of around 4,000 TCD. Diversification option is limited, and the cost of production is increased in the supply chain and procurement process.
• Streamlining Regulatory Strategies: Legal systems in the sugar sector need to be strong and regulatory strategies need to be streamlined for producers and go to market mechanism. Regulatory bodies play a crucial role in tackling and managing sugar prices, illicit border trading, support investment and developing sugar mills.
• Climate Change: Rising sea levels, weather management
• Agricultural Workforce: Attracting and retaining manpower to develop the industry
• High Competition in Prices and Quality: Strong competitors and substitutes to push prices down

New Investment Trends in The Sugar Industry:

• Governments Could Adjust their Regulatory Priorities: Collaborate with the Ministry of Agriculture and Rural Development (MARD) to set up investment projects in infrastructure to restructure cane and sugar industry to increase yield, quality, efficiency and competitiveness
• Strategies to Restructure Cane and Sugar Sector: Produce high yield and quality of cane, increasing the efficiency of supply chain, reduce costs of production, increase competitiveness.
• Develop Smart Technologies: Focus on intensive cultivation, utilizing crop science and technology and fully mechanization strategies to deploy from land preparation to harvesting, using environmentally friendly sources of energy such as biofuel from molasses or cane juice, bio-fertilizer
• Sustainability of Farmers’ Income: Increase per ha value of farming and assurance models for sustainable farmers income, relook the process of entire production, supplying the good varieties for farmers.
• Co-operative Union: To develop options and alternatives, land requirement, growers’ needs and harvesting best practices and effective supply chain.

Opportunities in The Sugar Industry

While MARD is working towards restructuring the sugar industry, stakeholders in the industry could seek for opportunities in expanding and diversifying in the areas of cogeneration, ethanol, bio-plastic in region which it has potentiality for developing sugarcane.

Author:

Pham Quoc Doanh
Chairman, Vietnam Sugarcane and Sugar Association.
E-mail: [email protected].