Crunch Time for Importers

For Vietnam, with 80 per cent of its population living on agriculture, fertiliser, especially urea fertiliser, is a crucial input for agricultural production. Thus, the Vietnamese Government advocates a policy encouraging local firms to make fertilisers. However, farmers do not benefit from this policy and usually have to pay high prices for fertilisers.

 

At present, Vietnam needs over two million tonnes of urea fertiliser a year, with only 800,000 tonnes supplied by local firms (Phu My Fertiliser Plant with estimated 650,000 tonnes and Ha Bac Fertiliser Plant with roughly 150,000 tonnes). The remainder is made up by imports. To ensure sufficient fertiliser supply for farmers and to stabilise the market, the Government exempts import tariffs on this commodity.

 

Mr Nguyen Tien Dung, Director of Agricultural Materials Co (Apromaco), a major fertiliser importer of Vietnam, said his company used to import one million tonnes of fertilisers from the Middle East, Russia, Indonesia, China and other countries. Each import shipment was huge. Since Phu My Fertiliser Plant began operations and met part of market demand, fertiliser importers like Apromaco no longer import big import batches. According to Mr Dung, this does not result from the market demand, but from the presence of Phu My Fertiliser Plant. The importers suffer business losses, but farmers do not benefit either. The threat of fertiliser shortage is always high during the crop.

 

Why is Phu My doing this? To encourage domestic production, the Government still subsidises the price of input materials for Phu My. With the subsidies, the price of Phu My fertiliser is lower than of imports. This purpose seems good, but many enterprises questioned whether the Government is effectively managing this mechanism when the selling price is set under the “designated” price mechanism, not through public auctioning on the market. This leads to wide price fluctuation, from the cost price to the market price, and this price differential runs into the pocket of speculators. Worse, Phu My does not reduce its fertiliser prices during high demand by farmers. Speculators rush to buy fertilisers at low prices and sell them at crop season so farmers have to pay high prices for fertilisers. The biggest losers are farmers, while importers are losing ground.

 

Mr Nguyen Ha Thuy, Deputy Chairman of Vietnam Fertilisers Association said to ensure the transparency of the fertiliser market, it is time the Government decided to force local producers to sell their products via public price auctioning on the market. This would eradicate the exploitation of State preferential treatments harming both farmers and honest importers. Market prices and reduced State subsidies on inputs for local producers are the expectation of the majority of enterprises. This is also in line with Vietnam’s WTO accession commitments.