A latest report from the Agriculture Alliance highlighted that subsidies benefit importers and foreign buyers, but not Vietnamese consumers or rice producers.
The head of the research team, Dr. Nguyen Duc Thanh from the Hanoi National University, said that “some links in the rice production chain had been supported by the State, including irrigation or infrastructure”.
Thanh said, “The tax policies are designed to support irrigation and infrastructure systems. The financial support is not counted when calculating the rice prices”.
“If rice is consumed domestically, the support will be given back to taxpayers. However, we cannot take back support from exports,” he said.
Thanh also brought out that there were problems prevailing in the current policies related to rice production and export.
Overproduction of medium- and low-quality rice and exports that are sold at low prices, are forced by subsidies. For the moment, the policy on the rice floor price does not bring substantial profits to farmers, but daunt them to grow high-quality rice varieties.
The most renowned rice expert in Vietnam, Dr. Vo Tong Xuan, believes that Vietnamese rice products have been underestimated by export companies, which offer low prices in order to contest with Thai exporters. Accurate production cost is not reflected by the prices.
Xuan said “the State has to pay hundreds of millions of dollars every year for irrigation works, but the expenses are not counted when calculating rice production costs”.
He also said “the low prices on exports caused farmers losses, but also placed high risks for Vietnamese enterprises”.
According to the sources, Vietnam’s rice, like other seafood products, could face a dispute in the US because the rice is sold at low prices in the market.
Dr. Nguyen Ngoc De from Can Tho University said that export prices are much lower than domestic prices. “The problem is that if Vietnam does not make rice exports a priority, the domestic market would not be able to consume the entire annual rice output,” Dr said.
The difference between domestic and export prices is due to an irrational taxation scheme.
While the enterprises that distribute rice in the domestic market bear a VAT of 5%, export companies don’t have to pay the tax.
He suggested removing the VAT on domestic rice distribution in order to create a level for both domestic distributors and exporters.
Nonetheless, speculations about the subsidies vary. Nguyen Hung Linh, chair of the Vietnam Food Association (VFA), withhold that the Vietnamese government was subsidizing the world’s rice consumers.
Linh said that Rice prices in the global market could not be controlled by Vietnam and could not one sidedly establish export prices, counting that the prices are based on supply and demand.