A real challenge
Vietnam has joined the ASEAN Free Trade Agreement (AFTA) which regulates that its domestic pork, chickens and eggs will no longer enjoy tax protection and subsidies by 2015.
This means that similar products from Thailand, Indonesia and Malaysia will face no barriers on the way to Vietnam.
Pham Duc Binh, Vice Chairman of the Vietnam Animal Feed Association, said the Vietnamese livestock industry falls behind regional rivals in terms of scale, productivity, prices and quality.
Once the subsidy policy is removed, it will put farmers and businesses at a distinct disadvantage, he said.
Thailand, for example, he said, has a comprehensive investment strategy for the sector and its businesses manage and produce feed, additives and minerals for their animals by themselves, rather than depending totally on imports like Vietnam.
In addition, they have advantages, such as access to low interest loans and no value added tax (VAT) on livestock feed, that help keep their prices at least 15-20 percent lower than those of Vietnamese breeders.
A long-term strategy needed
Suffering from long term losses, many foreign businesses are reducing the number of chickens they breed in Vietnam.
Nguyen Dang Vang, Chairman of the Vietnam Animal Breeding Association, said in 2011 CP, Emivest and Japfa raised more than 120 million chickens, but a year later they cut that number to only 70 million.
Nearly half of the poultry farms in northern provinces have ceased operating and large numbers in the south are in the same situation.
Aside from AFTA competition, Vietnam’s livestock industry is also under tremendous pressure from the EU, US and Brazil.
Over the past three or four years, hundreds of thousands tonnes of meat at considerably cheaper prices have been imported into the country annually.
In the first four months of 2013, about 5,000-7,000 tonnes of chickens were shipped into Vietnam every month, equal to half of the total domestic breeding production.
To save costs, many businesses even use frozen pork from the US to produce hotdogs, canned meat and Chinese sausages instead of purchasing domestic pork.