VietNamNet Bridge – Economists have called the low bids offered by Vinafood 1 and Vinafood 2 to provide 800,000 tons of rice to the Philippines a “blunder” because it has led to the perception that Vietnamese rice is “cheap”.

The low bid helped the two largest rice-export groups win the contract over their rivals.   

However, many rice- export companies have refused to sign export contracts with Vinafood, fearful of huge losses, Dan Viet reports.

Dr. Nguyen Van Nam, former head of the Trade Institute, in an interview given to Dat Viet, said that foreign business people, trying to force prices down, cited Vinafood’s low bids when negotiating to buy rice from Vietnamese exporters.

The director of a rice export company, who declined to be named, warned that exporters, who scramble for clients by offering low selling prices, are positioning Vietnam’s rice as “cheap rice”, preventing the country from selling at higher prices.

According to former Prime Minister Nguyen Cong Tan, rice exports in Vietnam are controlled by the two biggest food corporations. This so-called “dual monopoly” gives them exclusive rights, the right to collect rice from farmers and the right to export rice, he said.

The two companies have also created a “state monopoly”, which, in effect, has prevented private enterprises from taking part in the market.

“The Vietnam Food Association (VFA) also has too many rights when it comes to suggesting policy, and it has been operating like a state-owned enterprise, managing rice exports,” Tan said.

“The association does not admit private enterprises and it does not care about farmers. What it cares about is protecting the benefits of rice export companies,” he added.

Rice exporters export rice at low prices after paying low prices for rice materials from farmers, who then suffer losses or lower profits.

Rice production is a strong part of the economy in Vietnam, but the country continues to sell its rice cheaply.

Vietnamese farmers are frustrated about the poor capability of business people and the state’s rice-production chain mismanagement.

Meanwhile, local newspapers have reported that the government is considering removing the floor-price mechanism.

If this comes true, rice exporters would be able to determine the export prices themselves, and they would not have to consider reference prices set up by the VFA or any other agency.

At present, rice export companies must not sell at below $410 per ton for 5 percent broken rice FOB (free on board, 50 kilo packs, Vietnam quality), and $375 per ton for 25 percent broken rice.

If the floor prices are removed as predicted, rice exporters would have the right to determine their selling prices themselves, which would help increase exports.

Vietnam’s rice exports in the first four months of 2014 was not satisfactory, as reported by VFA. The country exported 2.04 million tons of rice, earning $931 million, a 7 percent decrease in quantity and 5 percent decrease in value compared with the same period last year.

Compiled by Thanh Mai