HANOI: Minister of Trade Vu Huy Hoang fears the livestock industry will face the biggest challenge from the Trans-Pacific Partnership (TPP), which will eliminate import tax on meat that stands currently at 15-40 percent.
Many of its members, including the US, Canada, Australia, and New Zealand, are big exporters of animal products and are sure to export large volumes to Vietnam.
Nguyen Duc Thanh, director of the Vietnam Center for Economic and Policy Research (VEPR) at the Vietnam National University in Hanoi, said the industry is less competitive mainly because of its heavy dependence on imported animal feed and remedial production technology, which have raised production costs for livestock firms.
Vietnam annually imports some 11 million tons of animal feed at a cost of more than US$3 billion, according to the Vietnam Animal Feed Association. Animal feed accounts for up to 70 percent of breeding firms’ production costs. The poor quality of breed stock, small scale of production, and the lack of advanced technology also increase costs. It costs $2.08 to produce a kilogram of pork in Vietnam, much higher than the $1.41 in the US, and $2.53 for beef compared to $1.77 in Australia.
Van Duc Muoi, general director of Vissan, a leading meat processor, said: “Eighty five percent of livestock is now bred on small-sized farms and only 15 percent is bred on large-scale farms.” He said though Vietnam has the world’s third largest number of sows – 4.5 million – it only ranks 15th-16th in pork output.
“Low productivity makes Vietnamese pork prices higher than that of other countries, and so it will be difficult for local pork to compete with imports after the TPP.”
Tong Xuan Chinh, deputy head of the Animal Husbandry Department, said the increasing competition from imports would force the livestock industry to fix its weaknesses, failing which it would not survive.
Livestock breeding companies are facing increased competition from imported cattle and poultry products. Beef, chicken, and pork from Australia, Japan and the US have flooded supermarkets around the country.
Their prices are even lower than those of local products, and their safety and hygiene standards are thought to be superior, and hence an increasing number of customers are opting for them.
Pork imported from Europe, the US and Canada costs 15-20 percent lower than local products. Thus, food producers and restaurants too use imported meat.
An executive at food producer Duc Viet said his firm uses pork imported from Canada and the US to make hotdogs and sausages. “Using imported products ensures our competitiveness.” Muoi of Vissan said the livestock industry has been badly hit by imported meat.
Imported cattle and poultry meat will become even more dominant after the pact comes into force, and some food producers plan to build cold storages for imported meats. Livestock firms are facing huge losses due to an oversupply caused by excessive domestic production and growing imports.
Their situation is expected to worsen when the TPP comes into effect. After the conclusion of the TPP talks early this month, the participating nations would review legal procedures to prepare for the official signing, Hoang said, adding that the processes often takes at least 18 months.
Unable to compete with chicken imported from US, the Southeastern Poultry Association’s members reported a combined loss of VND500 billion ($22.61 million) in the last six months. Bankruptcy is unavoidable for many of them if they do not receive more support from the government.
According to the General Department of Customs, Vietnam imported 122,000 tons of beef, pork and poultry meat worth $194 million last year, two thirds of which was poultry. The country also imported nearly 181,000 live cows and buffaloes for slaughter.
Talking about the risk of failure the local animal husbandry industry could face after the TPP comes into effect, economist Pham Chi Lan said Vietnam should abandon some weak industries so that it could prioritize the development of other, more competitive industries.
Minister Hoang said Vietnam would have to restructure its agricultural sector by adopting technologies and increasing the scale of cultivation and livestock breeding to reduce costs and control quality.
