Rivals challenge Vietnam in low class rice export

Vietnam, well known as the largest low class rice provider in the world, now has many redoubtable rivals in the market segment.

Le Tuan, Chair of Vinh Long Import-Export Joint Stock Company (Inmex Cuu Long), has signed a contract to sell 10,000 tons of rice to Kenya.

Every year, Kenya needs to import about 200,000 tons of rice. In general, Pakistani rice exporters win the bids, because they enjoy preferential tariffs of 35 percent, while other exporters must bear high tariffs of 75 percent. Since Kenya could not buy enough rice from Pakistan, it must lower all import tariffs to 35 percent, allowing Inmex Cuu Long to sell rice to Kenya.

The story of Inmex Cuu Long illustrates how Vietnam cannot control the low cost rice market as it did just three years ago. Prior to 2007, when poor areas in Africa, or countries like the Philippines, Iraq or Cuba, Malaysia and Indonesia needed rice, they always sought rice from Vietnam, because it was the biggest supplier of low class white rice at low prices. Since 2008, however, Vietnam has no longer been the only option.

“Importers can purchase rice either from Pakistan or Myanmar now. Even Thailand, which has been known as a high class supplier, has also begun selling low cost rice,” Le Tuan explained. “When there are more suppliers, everyone will get a smaller piece of the market.”

At this moment, buying five percent broken rice from Pakistan can save African importers $10-15 per ton. They can also save $15 on transport fees. Though Myanmar has joined the rice export market for the last five years, the country can export four million tons of rice of the same kind as Vietnam’s, an increase of 150 percent over 2008. In 2010, Myanmar may export 4.5 million tons of rice, just one million ton lower than Vietnam.

The competition is not only with rivals for commercial contracts, but also government contracts. Previously, the Philippines had to import some two million tons of rice a year and Vietnamese enterprises regularly won the bid, thanks to low bidding prices and good trade relations.

During the latest bid for the Philippines, which sought to purchase two million tons of rice in late 2009, Vietnam had to share a ‘piece of the cake’ with exporters from Thailand and other countries.

Malaysia and Indonesia are two similar cases. Prior to 2007, the two countries imported some 200-500,000 tons of rice, mostly from Vietnam under government contracts. Since 2008, the contracts have fallen into the hands of Thai, Pakistani, Myanmar, Indian and Chinese exporters.

For many years, Vietnamese enterprises have been criticized for failing to penetrate the high grade rice market and having to sell rice at low prices. Now Vietnam must compete with many other rivals also selling low price rice.

Tags: Vietnam rice, Vietnam rice exports