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Food Association criticized for taking over state’s job 2009-11-04 - Viet Nam Net

Economists say the Vietnam Food Association (VFA) should stick to protecting its members, large and small, and not substitute for the state as manager of rice exports.

On the heels of a report that the Ministry of Industry and Trade (MOIT) is planning to screen small rice merchants out of the exporting sector, the Vietnam Food Association (VFA) came in for scathing criticism at a November 3 workshop on rice export management policies.

Vietnam is second only to Thailand as a rice exporter and this year will supply more than six million tons of rice to the world market.

‘Food security’ called a pretext for manipulation of the market

Pham Chi Lan, a well known economist, contended that officials have tended to use ‘protecting food security’ as a pretext for intervention in the rice market. Vietnam has lost money because of bad management, but this was blamed on the requirements of ‘food security’.

In 2008, Lan recalled, Vietnam decided to stop exporting rice “to ensure national food security.” At that time the world rice price was very high, and farmers and enterprises missed an opportunity to earn fat profits from the price increases. Subsequently, a high government official admitted in questioning by the National Assembly that the embargo was a mistake. However, Lan emphasized, no ministry or government official was disciplined for this, while the farmers suffered.

Lan said that ‘food security’ was a pretext; the real reason for the ban was quite different.

Another commentator, Nguyen Dinh Cung of the Central Institute for Economic Management (CIEM), said that ‘food security’ should be a long term strategy, not a pretext for constant meddling in the market.

Echoing Cung, another noted economist, Dr. Le Dang Doanh, said: “Food security is not something which can be changed every two weeks.”

What is the role of VFA?

Since before Vietnam joined the World Trade Organization (WTO), VFA has taken over two roles formerly managed by the state. It approves rice export contracts and sets rice export floor prices.

Cung judged that the requirement that enterprises must register rice exports and have the approval of VFA before shipping them deters businesses from participating. A market, he said, ought to be open to healthy competition. VFA ought to serve the interests of its members, not the interest of the state.

“VFA should give back the job of rice management to the state,” Lan said flatly.

Defending the role of VFA, Nguyen Tho Tri, one of its deputy chairmen, pleaded that rice export management aims at many goals, goals that sometimes conflict.

For example, said Tri, VFA wants the Price Control Agency (a unit of the Ministry of Finance) to cooperate with the association in order to ensure transparency in setting the export floor price. However, the Government has banned participation of government officials in the association.

Deputy Minister of Industry and Trade Nguyen Thanh Bien said that under WTO rules, government agencies do not have the right to intervene in the business of enterprises and therefore his ministry cannot take on the work of rice export management.

Lan took issue. WTO rules allow the State to intervene the market if the national food security is threatened, she said. “MOIT just tries to pass the buck to VFA.”

How can rice exports be managed most effectively?

Most of the participants at the workshop urged that VFA be restructured.

The Farmers’ Union is a member of VFA. However, said a Farmers’ Union deputy chairman, Nguyen Huu Luong, the voice of the farmers is given hardly any weight there. Its membership is just window dressing.

The Deputy Chairman of the legislature’s Committee on Economics, Le Quoc Dung, said that the association ought to be reorganized to ensure that the farmers’ interest is heard and resolve conflicts of interest among participants in the production and export chain.

A representative of a rice exporting firm in Dong Thap province said frankly that it is necessary to put another person into the post of Chairman of VFA. [The current chairman is also CEO of Vinafood 2, the former southern region rice exporting monopoly.]

Lan argued that it is not necessary for a taskforce to supervise rice exports and allocate permits. She said that in the garment industry, enterprises are only required to register export contracts, and monitoring is automatic. When the total amount of exports reaches a threshold, they stop.

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BUSINESS IN BRIEF 3/11 2009-11-03