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Bringing Vietnamese rice to international standards

Released at: 11:19, 05/11/2018 BUSINESS SPOTLIGHT

Bringing Vietnamese rice to international standards

Photo: Tan Long

Mr. Truong Sy Ba, Chairman & CEO of the Tan Long Group, tells VET about its rice exporting experience and what Vietnam must do to become a leading rice exporter.

by Khanh Chi

Vietnam has strengths in growing rice, but in some markets its brand names are behind those from Thailand and India. Why is this and what needs to be done to better compete with products from those countries?

There are many reasons. Firstly, links between enterprises and farmers in Vietnam are weaker than in Thailand and India. For a long time, we have lacked these connections to create large rice fields. Vietnamese enterprises are also not active in developing international markets and have not invested in rice production that meet quality criteria and are in categories importers need. Farmers do not cultivate rice according to orders from enterprises for export.

Secondly, enterprises have still not invested in developing international markets. Most output-dependent companies are multinationals, such as Olam, Luis Dreyfus, Phoenix, Sunrice, and ADM. When these companies have other suppliers in Thailand and India with more competitive prices and better quality, Vietnamese exporters can’t sell their rice.

Thirdly, post-harvest tasks such as drying and storage are still of a low quality in Vietnam, while technology and management levels are outdated. These factors lower product quality and result in small inventories, leading to lower competitiveness in local rice exports.

Finally, Vietnamese enterprises joining the export market can be divided into two blocks: State-owned enterprises with a lot of capital, which account for over 50 per cent of rice exports, and private enterprises with small capital and poor competitiveness due to a lack of import and export experience. The private sector should be the driver in breaking into markets.

Tan Long recently overcame major international exporters from China, Thailand and Australia to win a contract for 60,000 tons of Japonica rice exports to South Korea, which is considered a golden opportunity to raise the profile of Vietnamese rice in the international market. What are your thoughts on this?

This is the result of dynamism and actively exploiting the international market, and is also the result of an association under the principle of enterprises ordering rice and farmers then growing rice that meets market demand.

The global economy is flat, and enterprises in international markets compete and have equal opportunities. The Tan Long Group gaining international rice export contracts is the result of its new thinking and dare-to-do attitude.

We have invested in and signed contracts with rice farmers. We pursue a business philosophy of focusing on market demand, from strongly investing in developing a linkage model between exporters and farmers to building factories to serve modern storage and processing requirements. Tan Long, in cooperation with farmers, has been trying to compete with international exporters, to develop export markets, to bring Vietnamese rice into international markets. Evidence of our success includes us overcoming Chinese, Thai and Australian companies to secure the contract for over 125,000 tons of rice exports to South Korea earlier this year.

Is Vietnam escaping from its image as a low-level rice exporter and becoming known as an exporter of high-quality products?

Farmers are in the habit of growing low-value rice and our exporters send rice to traditional markets such as Indonesia and the Philippines in large quantities but at low prices. Production does not follow market requirements, so we need to change to production based on market demand and move towards the production of high-quality rice, gradually affirming a Vietnamese brand of high-quality rice.

From the success of Tan Long, what experiences can you share with other rice exporters?

Market demand is the relationship between supply and demand. The needs of international markets are huge and varied, while supply is also diverse. Thus, we should consider choosing rice in which we hold more advantages than other countries.

Based on Tan Long’s experience, we choose Japonica, Jasmine, and some other aromatic varieties, and work with farmers on large fields. Tan Long is confident because we have output markets. In addition, we make large investments in modern storage, drying and processing facilities.

We recommend that enterprises who do not have sufficient resources or finances cooperate with major exporters in production and supply.

What do you think about the opportunities and challenges for the rice sector in the time to come? What are Tan Long’s plans for the next five years?

In my opinion, global rice demand is increasing, while the amount of agricultural land is narrowing due to industrialization, population increases, and climate change. But this is a great opportunity for Vietnamese rice exporters entering the global market.

When demand is increasing, consumers’ requirements are higher. They seek delicious products that are safe and healthy. Therefore, Vietnamese rice must be of high quality, with no residue of pesticides or growth regulators. To increase productivity and reduce costs, investment must be made in drying machinery and huge storage areas, and high production criteria must be set that meet international standards.

The plan of the Tan Long Group is to become a large-scale rice producer and exporter, capable of supplying 500,000 to 1 million tons of rice per year for the next five years. We plan to invest in the construction of three plants capable of drying and storing 240,000 tons each per year.

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