Saturday, April 26, 2008

Labour Export Vietnam, Rice and Labour Shortages in Vietnam

Vietnam's trade deficit almost quadrupled in the first four months of the year, the government estimated, as an import surge gained momentum.

The gap widened to $11.1 billion compared with $2.86 billion at the same time a year earlier, based on preliminary figures released by the General Statistics Office in Hanoi. Imports climbed 71 percent to $29.36 billion, while exports rose 28 percent to $18.26 billion. Import growth accelerated from a 63 percent rate through March.

``A developing country like Vietnam needs to import raw materials for production,'' said Tran Xuan Huy, chief executive officer of Saigon Thuong Tin Commercial Joint-Stock Bank, the only bank on the Ho Chi Minh City Stock Exchange. ``It's a temporary situation. In the long-run we should be able to make many of these products ourselves.''

The trade deficit is largely financed by short-term capital sources, leaving Vietnam vulnerable if such capital is withdrawn, Le Xuan Nghia, director of the banking development strategy department at the State Bank of Vietnam, said in the April 26 edition of the Saigon Times Weekly, which was released yesterday.

``So far I don't see any evidence that the global downturn is causing a withdrawal of capital from Vietnam,'' said Huy of Saigon Thuong Tin, in a telephone interview today from Ho Chi Minh City. ``Maybe some foreign companies may have to restructure their operations and cut back a bit, but most investors realize the opportunities in Vietnam are very big.''

Imports of machinery and equipment climbed 47 percent to $4.61 billion, while iron and steel purchases from abroad jumped 153 percent to $3.33 billion, the General Statistics Office said.

The purchase of petroleum products from overseas rose 8 percent by volume and 70 percent by value to $3.76 billion, as global crude oil prices have been on average about three-quarters higher so far this month than during the same period in 2007.

Luxury Car Concern

The import of autos and auto parts surged 333 percent to $991 million. Growing imports in Vietnam of goods like luxury cars are a concern, World Bank economist Martin Rama said, according to an April 7 report in the Vietnam Investment Review.

The higher oil prices benefited Vietnam's exports of crude oil, which rose 46 percent by value to $3.5 billion even while slipping 10 percent by volume. Vietnam is Southeast Asia's third- biggest oil producer.

Garment exports jumped 25 percent to $2.61 billion. Vietnam may pass India and Mexico to become the second-biggest supplier of garments to the U.S. this year, according to a posting on the Web site of the American Chamber of Commerce in Vietnam. Footwear shipments advanced 16 percent to $1.36 billion, while seafood exports rose 14 percent to $1.15 billion.

Seafood Exports

``Demand for seafood is better than last year, and we are expecting export prices to increase,'' said Nguyen Xuan Hai, deputy director of Cuu Long An Giang Seafood Export-Import Joint- Stock Co., in a telephone interview today from the Mekong Delta province of An Giang. ``We just found one partner in New Zealand and another in Saudi Arabia.''

Exports of rice climbed 12 percent by volume to 1.567 million tons, and surged 73 percent by value to $775 million.

``Contracts for the entire year's exports are often signed within the first two quarters of the year, locking in prices,'' the agricultural attache's office at the U.S. Embassy in Hanoi said, in a report on Vietnam's rice industry dated April 6.

Labour Shortages

Vietnamese farmers lose thousands of dollars every year due to manpower and machinery shortages for harvesting rice, according to a recent survey by Can Tho University.

Young farmers are leaving in droves for urban centres, industrial parks and export processing zones to look for jobs with better pay, creating a huge labour gap in the Cuu Long (Mekong) Delta, Viet Nam’s biggest breadbasket.

The Central Agricultural Extension Centre said at a press conference that the mechanisation of agriculture was essential to solve the labour problem.

A combine harvester operated by three people has the manpower equivalent to that of 100 farmers, but can yield much higher productivity. This would help the industry avoid losing billions each year, said Nguyen Van Chien, an official from the Ministry of Agriculture and Rural Development’s Department of Forest and Agricultural Products and Salt Production (DFAPSP).

Agricultural experts said agricultural mechanisation would enhance the quality and quantity of Vietnamese rice, boosting the country’s competitiveness for rice exports with its chief rival, Thailand. At present, Vietnamese rice sells for $20 less per tonne than Thai rice.

According to DFAPSP figures, current machinery can meet only 15 per cent of the country’s harvesting demand, most farmers still harvest by hand and do not have enough money to buy modern machines.

Another problem is that Vietnamese paddy fields are wet and muddy compared with waterless foreign fields. This makes it hard for foreign-made, modern machines to work well here. — VNS

Rice Production

Source UNCTAD:

Rice is the second largest produced cereal in the world. At the beginning of the 1990s, annual production was around 350 million tons and by the end of the century it had reached 410 million tons. World production totaled 395 million tons of milled rice in 2003, compared with 387 million tons in 2002. This reduction since the end of the previous millemium is explained by the strong pressure put on land and water resources, which led to a decrease of seeded areas in some Western and Eastern Asian countries.

Production is geographically concentrated in Western and Easter Asia with more than 90 percent of world output. China and India, which account for more than one-third of global population (52,3% over the 1999-2003 period), supply over half of the world's rice. Brazil is the most important non-Asian producer, followed by the United States. Italy ranks first in Europe.

World production has shown a significant and very steady growth, almost exclusively due to increasing production in Western and Eastern Asia.

Growth has not been homogeneous in this group of countries. Traditionally, production in Asian increases, except in Japan. The decrease in Asian production at the end of the 1990s did not get enough attention as it was considered to be a temporary abnormality. However, it has now begun to seriously affect some countries such as China where rice areas have declined as a consequence of water scarcity and competition from more profitable crops (oleaginous). Despite this trend, rice still plays a vital role in all the countries in the region.

World rice consumption increased 40 percent in the last 30 years, from 61,5 kg per capita to about 85,9 kg per capita (milled rice).

Three consumption models can be distinguished:

- Asian model: average consumption higher than 80 kg/person per year (China: 90kg, Indonesia: 150kg, Myarmar: more than 200kg, the record);

- "PVD subtropical" model: average consumption between 30 and 60 kg/person per year (Colombia: 40kg, Brazil: 45kg, Ivory Coast: 60kg);

- West model: average consumption lower than 10 kg/person per year (France: 4kg, United States: 9kg).

International rice trade is estimated between 25 and 27 million tons per year, which corresponds to only 5-6 percent of world production. It makes the international rice market one of the smallest in the world compared to other grain markets such as wheat (113 million tons) and corn (80 million tons).

Besides the traditional main exporters (Thailand, Vietnam, India and Pakistan), a relatively important but still limited part of rice traded worldwide comes from developed countries in Mediterranean Europe and the United States. There are two major forces behind this: new food habits in developed countries and new market niches in developing countries.

The Middle East is the leading import and export region, accounting for 35 percent of the world's rice imports and about 75 percent of total exports.

It is projected that the global market will increase 3 percent per year over the mid to long term. However, there are uncertainties about this projection because importers, normally low to lower-middle income countries, have vulnerable economies.

The map below shows the main importers and their suppliers. Each color represents an importer (either a country or a group). The values correspond to imports of different types of rice (paddy, brown, white, broken), in thousands of dollars. The major importers are Indonesia, Bangladesh, Nigeria, the Philippines, Iraq and Brazil.

Most rice is consumed in the same country that it is produced. This is one of the most important characteristics of the rice production chain. Domestic rice markets are, therefore, very segmented and often one of the most protected.