Vietnam considers higher import taxes to freeze frozen chicken imports
The increasing volume of frozen poultry imported in to Vietnam threatens the existence of the domestic Vietnamese animal husbandry sector.
Vietnam had previously placed temporary bans on imported poultry in an attempt to curb further spread of H5N1 HPAI (highly pathogenic avian influenza), while illegal poultry trade in live chickens (smuggling) across Vietnam’s northern border from China is a persistent problem. But current concern in Vietnam over poultry imports is about the increasing volume of entirely legal and legitimate poultry meat being imported to satisfy the population’s voracious appetite.
It appears the Vietnamese have developed a taste for low priced frozen chicken imports to the detriment of the local poultry production industry. Typical is chicken-rice restaurateur Nguyen Quang Chien said a report by Thanh Nien. He now buys imported chickens from supermarkets rather than the domestic poultry he used to buy at local slaughterhouses. “They’re cheaper,” he says.
Imported chicken on the rise
Local poultry farmers are not concerned about bird flu these days, says Vietnam Business Finance, but imported frozen chicken is sticking in their craw. In September 2008, imported chicken was selling at $US1.1 to 1.2 per kg, significantly less than home-produced birds that were priced at $1.5 per kg. The imported poultry product is cheaper, they claim, due to lower costs enjoyed by foreign producers and unrealistically low import taxes levied by the government. Vietnamese producers are saddled with excessively high costs for poultry feed, doubling in the last 12 months, and inflicting huge losses on breeders who cannot raise prices enough to fully compensate.
Poultry traders hit back, saying that without imported chicken, the price of locally produced chicken would have increased by 15 to 20 percent. They estimate around 3,000 tonnes of frozen chicken will be imported every month into Vietnam by the end of 2008. According to the Ho Chi Minh City Veterinary Agency, the city is currently consuming a significant volume of imported chicken, amounting to around 80 tons per week day and rising to almost 200 tons a day over the weekend and on public holidays.
Imports threaten domestic sector
Vietnamese chicken farmers are scaling down production or closing altogether to avoid heavy financial losses. Many large poultry farms in the south of Vietnam, some of which once boasted flocks amounting to hundreds of thousands of chickens, have slashed stocks by 50 percent or more. Others have had to stop breeding and have put their farms up for sale, but there are no buyers.
La Van Kinh, deputy head of the Southern Institute of Agricultural Science, says imports are threatening the very existence of the domestic animal husbandry sector. Many breeders, who are already struggling with higher production costs and epidemics, have gone bankrupt since their products can’t compete with cheaper foreign imports. There are currently around 20 Vietnamese companies importing chicken (also pork and beef) from countries as far afield the US, Brazil, Argentina, Australia, Canada, and India.
Local production facing big difficulties
By September 17, 2008, the Ministry of Agriculture and Rural Development (MARD) had asked the government not to encourage imports of animal and poultry staples that can be produced at home such as eggs and meat, said a report from Vietnam News Agency (VNA). “We should take measures to control inflation and promote domestic production,” said Livestock Husbandry Department head Hoang Kim Giao at a conference held in Hanoi on Sept. 17. Giao added that the sector should intensify investment in breed production and supply while tightening the examination of breed origins and boosting vaccination for animals and poultry. He also called on farmers to apply advanced technology to improve animal husbandry’s output in an effort to solve the sector’s current difficulties. The sector is struggling with numerous problems when its growth rate slowed down to 0.03 percent in the first six months against its yearly target of between 8 and 10 percent.
Similar sentiments were heard from other government livestock specialists who claim the overly low import tax is the “chief culprit” behind the recent overflow of meat, eggs, and milk into Vietnam, said a report by VietNamNet Bridge. Nguyen Xuan Duong, deputy head of the Livestock Husbandry Department under MARD, said that imports of meat and dairy products have become worryingly high recently and threaten local production. He went on to say that local production is facing big difficulties due to lack of capital, epidemics, and higher feed prices. Meanwhile, local breeding farms cannot sell their products due to the massive imports. According to Duong, the prices of poultry meat and eggs have decreased, with chicken selling at $1.39 to 1.45/kg and eggs at $0.08 to 0.09/egg.
Prof Nguyen Dang Vang from the Livestock Breeding Institute said Vietnam has imported too much meat (including poultry meat) so far this year and consequently placing big difficulties on local farmers. Vang said that 118,000 tonnes of meat of different kinds were imported into Vietnam in the first eight months of the year with chicken accounting for 103,400 tonnes, almost three times the 2007 figure. Vietnam’s meat exports have never reached that level. If the current import growth rate is maintained, Vietnam will import 200,000 tonnes of meat this year, he said.
Decreased import tax behind recent overflow
One of the reasons behind the high level of imports is the decreased import tax, said Vang, claiming that he well understands how the import tax was cut by the government in an effort to restrain inflation and ensure sufficient supplies for domestic consumption. However, the import tax should be high enough to encourage local production, Vang said. Pham Duc Binh, deputy head of the Vietnam Feed Association, told the local media how, before slashing tariffs on meat imports in August 2007, authorities had failed to inform farmers. They also failed to warn breeders to reduce their scale of production or advise them of measures to handle competition from imports, he said. There are no authorities to check imported meat for quality in terms of excessive preservatives or banned food additives, he added.
Vietnam cut taxes on this group of goods sooner and by more than the deadlines stipulated in the country’s World Trade Organization (WTO) commitments. Under its WTO commitments, Vietnam only had to cut tariffs on poultry meat to 15 percent by 2012 but had already slashed the tariffs from 40 percent to 12 percent in Aug. 2007 after it officially joined the WTO on Jan. 11, 2007. The import tax on eggs has also decreased from 80 percent to 20 percent. Since then, imports have flooded into Vietnam and depressed market prices. Foreign frozen chicken cost just two-thirds the price of local products. A 522-gram box of Vietnamese chicken legs sells for $2.68, virtually the same price as a 900-gram box of chicken legs imported from Brazil.
Import tax increase plan proposed
Another factor in producer price rises is that Vietnam has to import large amounts of animal feed and raw materials. According to the Animal Health Bureau (AHB), feed prices have risen between 40 to 60 percent since the end of 2007. Many observers blame the lack of zoning plans and strategies for growing feed crops in Vietnam. Pham Duc Binh, deputy head of the Vietnam Feed Association, claims the dependence on imports of corn (maize) and bran is paradoxical in an agricultural nation like Vietnam. In the first half of the year, Vietnam imported over 3.5 million tons of feed at a cost of $1.52 billion, in addition to large quantities of raw materials like corn and bran. According to the AHB, domestic producers can meet nearly 79 percent of the demand for animal feed and 70 percent of the demand for raw materials.
By early Oct. 2008, MARD had officially asked the Prime Minister to adjust the import taxes on livestock products and animal feed to protect the local husbandry industry. It had now provided actual proposed figures, said VietNamNet Bridge. Poultry meat and eggs would bear an import tax of 40 percent instead of the current rate of 12 percent, while tax on poultry legs and wings would be 20 percent instead of 12 percent. Professor Le Hong Man, Deputy Chairman of the Vietnam Poultry Livestock Association, applauded the MARD’s tax increase plan, saying the increases, if approved, would help rescue local production. MARD has also proposed slashing tax rates on feed imports.