Southern Region Food Corporation, commonly referred to as Vinafood 2,
did not break Vietnam Food Association rules on rice export pricing, a
VFA deputy chairman assured the press on October 7.
Vinafood 2 is a state-owned enterprise that in 2008 reported earnings of
over $2 billion from rice exports alone. Its CEO, Truong Thanh Phong, is
also the current head of VFA.
Nguyen Tho Tri, the VFA executive, said a misunderstanding occurred
because VFA did not update information on the rice floor price on its
website. That made it seem that its biggest member was selling below the
permissible minimum price. In fact, Tri said, when Vinafood 2 and three
provincial rice companies agreed to export rice at just over $400 per
ton in August, they were in accord with VFA guidance posted late in July.
Tri said also that prior to July 13, 2009, the floor price was
'flexible.' This means that though VFA set a floor price, enterprises
still could sell rice to foreign customers for less 'if the export deals
were reasonable.' Enterprises were expected to clear such deals through
VFA. "Therefore, even though the floor price was set at $410 per tonne,
enterprises still could sell rice at below the price if they could
persuade VFA," Tri said.
Tri's explanation has not been accepted by rice exporters in Mekong
Delta. Tuoi tre newspaper quotes some rice exporters as saying that they
never receive an official notice of minimum sales prices from VFA. "It's
always oral," one said, "and the mechanism for adjusting it is really
obscure. Whatever VFA sets up must be respected by all enterprises. How
dare Tri say that those who can 'persuade' VFA will be able to export
rice at any price?"
Other businesses asked why VFA keeps adjusting the floor price for rice
exports when Vietnam's rice price is always the lowest and Vietnam does
not have rivals in the lower end of the white rice market.
What's the role of Saigon Food?
The VFA executive also defended Vinafood 2's sale of rice via a
Singapore subsidiary, the "Saigon Food Co." Vinafood 2 set up Saigon
Food under the Government's development strategy and with the approval
by the Ministry of Planning and Investment, Tri said. It's a 100 percent
state-owned firm with investment capital of $800,000.
Local newspapers, led by Tien Phong, have pounced on evidence that
Vinafood 2 on August 26 sold rice cheaply to Saigon Food, which then
immediately cut an export deal with an African buyer for an undisclosed
price. The $2 million consignment, purchased by Saigon Food for $406 per
tonne, left Ben Nghe Port in HCM City City on August 27.
Tri said that the thing that needs to be clarified here is that Vinafood
2 did not sell rice for less than the floor price. There's no need to
clarify why Vinafood 2 did not sell directly to the African party. In
many cases, Tri emphasized, a Singaporean company will have better
advantages in negotiating with the partners than a Vietnamese company would.
Other rice exporters scoff at this explanation too. Requesting
anonymity, one businessman said that Vinafood 2 does not need to market
through a subsidiary, Vinafood 2 itself is been well know as a big
exporter able to make direct transactions with foreign partners.
"The act of setting up a subsidiary abroad makes everyone think that
this is a way of earning illegal profits," he said.
Official sources promise investigations
Tuoi Tre newspaper asked a deputy minister of trade, Nguyen Thanh Bien,
his thoughts on the matter. "It's quite normal for a parent corporation
to sell products to a subsidiary," Bien said; "this is not illegal. The
worry here is that the parent company deliberately sold rice at the
floor price to its subsidiary, so that the subsidiary could resell to
the actual buyers at a lower-than-floor price. This may badly affect our
rice exports, as foreign partners may make corrupt use of this to force
Vietnam's rice price down.
"We will examine and clarify the case. If enterprises violate the
current regulations, they must be punished."
Tien Phong, meanwhile, queried Le Quoc Dung, a deputy Chairman of
National Assembly's Economics Committee. "I think," he said, that we
need to discuss whether it's a good idea to let the General Director of
Vinafood 2 also serve as Chairman of VFA. Economist Le Dang Doanh is
right; this issue should be discussed when the National Assembly meets
later this month.
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