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Removing bottlenecks for the sustainability of the rice industry

Trung An brand rice packing line for export to Europe. Photo: DNCC

Looking back at 2022, Vietnam's rice exports have achieved impressive results with export output reaching 7.1 million tons, an increase of 13.8% compared to 2021. However, despite the success in volume, export turnover only increased by 5%.

Explaining this, Mr. Nguyen Ngoc Nam, Chairman of the Vietnam Food Association, said that in 2022, the credit limit for the food industry is limited, so it is difficult for rice exporters to access capital. The fact that enterprises do not have enough capital to purchase has affected their ability to temporarily store for good prices. This is the main reason why the average export price for the whole year is lower than expected. Thereby affecting the profits of both traders and rice growers.

From the perspective of businesses, Mr. Nguyen Viet Anh, General Director of Phuong Dong Food Company, said that with loan interest rates up to 8-10%, some rice factories have considered leasing instead of operating because they are no longer profitable.

Currently, the Winter-Spring crop of 2022/2023 is preparing to enter the harvest period. Therefore, rice exporters are making efforts to prepare warehouses, facilities, processing equipment and capital to organize the purchase. However, many businesses said that they have mortgaged all their assets, and the loan amount is not enough to meet the demand for rice when the harvest comes.

Similarly, Mr. Nguyen Van Nhut, Director of Hoang Minh Nhat Joint Stock Company, likened the lack of capital to purchase rice to "rice ready on the table but not eaten". According to Mr. Nhut, to buy 10,000 tons of rice needs capital of up to VND 150-200 billion. Therefore, the purchase of one million tons of rice is beyond the reach of enterprises.

Pham Thai Binh, General Director of Trung An Hi-tech Agriculture Company, said that in order to develop a sustainable rice industry, there is certainly a lack of capital.

Currently, capital from banks only meets 50% of the investment and expansion needs of enterprises, the other enterprises are still struggling to find a solution.

In the face of such difficulties, Mr. Nguyen Ngoc Nam said that it is necessary to create more favorable conditions for efficient rice exporting enterprises to access bank credit in the context of economic difficulties due to the long-lasting consequences of the Covid-19 pandemic.

Accordingly, the State Bank should consider and discuss with commercial banks the possibility of strengthening unsecured lending policies. This policy can only be applied during peak harvest periods and must be based on the results of the assessment of capacity and business history of each enterprise to have appropriate sponsorship programs for each customer. In addition, Mr. Nam proposed the State Bank direct commercial banks to provide credit support to raise the credit rate for agricultural enterprises in general and rice enterprises in particular.

In addition to the problem of capital for rice purchasing activities, the weak logistics situation also poses great challenges for businesses.

Mr. Vo Cong Thuc, Quality Management Director of Loc Troi Group pointed out that the post-harvest loss rate in Vietnam is up to 11-13%, while the cost of quality loss is 3-5%. Specifically, for long-grain rice, after cutting for 24 hours, if it is not taken to the drying factory in time, there will be fermentation, and a sour smell, reducing the quality of the rice.

Similarly, some fragrant rice lines lose their smell, and the quality of the rice is no longer as good as the original. Accordingly, Mr. Vo Cong Thuc affirmed that the inadequacies in the logistics system are greatly affecting the quality of rice.

Agreeing with Mr. Thuc, Mr. Phan Van Chinh, Director of the Import-Export Department - Ministry of Industry and Trade, acknowledged that the domestic logistics system has many shortcomings and is a big challenge for businesses.

According to Mr. Chinh, the road freight to and from the seaport is even more expensive than the freight rate for shipping goods to Singapore or Hong Kong (China). Overcoming these inadequacies, Mr. Chinh wished that local businesses, especially in the Mekong Delta region, support more investment in transportation, loading and unloading points, and container packing to bring barges straight to Cai Mep port (Mrs. Ria - Vung Tau), Cat Lai port (HCMC) for export.