Why is Vietnam Spending Over $800 Million to Import a Product We Export in the Top 3 Worldwide?

Rice, a staple food and a significant agricultural commodity in Vietnam, has been making notable strides in the international market.

According to preliminary statistics from the General Department of Customs, in the first eight months of 2024, Vietnam exported approximately 6.15 million tons of rice, generating nearly $3.85 billion in revenue. This remarkable performance translates to a 5.8% increase in volume and an impressive 21.7% surge in value compared to the same period in 2023.

The average export price of rice during this period stood at $625 per ton, marking a 14.8% increase from the previous year. Rice is currently the fifth-highest exported commodity in Vietnam’s agricultural sector, following wood and wood products, seafood, fruits and vegetables, and coffee.

Indonesia, the Philippines, Malaysia, and China remain the traditional and primary importers of Vietnamese rice.

However, it is worth noting that Vietnam’s rice imports have also been on the rise. In the same eight-month period, Vietnamese businesses spent $843 million on importing various types of rice, reflecting a 43.6% increase compared to 2023. At this rate, the import turnover for rice is projected to reach or even surpass the $1 billion milestone in 2024, which would be unprecedented.

In 2023, Vietnam spent $860 million on rice imports, primarily from India and Cambodia. The first eight months of 2024 witnessed a surge in rice imports from India, particularly broken rice. Vietnamese enterprises favor Indian rice due to its competitive pricing, benefiting from a special preferential import tax rate of 0% under the ASEAN-India Free Trade Agreement (AIFTA).

The significant expenditure of over $800 million on rice imports, despite Vietnam’s prominent position as one of the world’s top three rice exporters, has raised eyebrows. So, what lies behind this seemingly contradictory trend?

Why is Vietnam Increasing Rice Imports?

It’s important to note that the rice imported into Vietnam is mainly lower-grade rice, including 25% broken rice and 100% broken rice. These types of rice are typically used for producing rice-based products such as noodles, cakes, and animal feed.

According to experts, the surge in rice imports over the past eight months can be attributed to the increase in Vietnam’s rice export prices since mid-2023, which have remained at a high level. In fact, at certain points, Vietnam’s rice prices have far exceeded those of its competitors, Thailand and Pakistan.

Specifically, as per the Vietnam Food Association’s data updated on September 11, the export price of 5% broken rice from Vietnam reached $567 per ton, significantly higher than the same variety from Thailand and Pakistan, which stood at $565 per ton and $535 per ton, respectively. Similarly, Vietnam’s 25% broken rice was priced at $533 per ton, outpacing Thailand’s ($521 per ton) and Pakistan’s ($503 per ton) offerings.

Meanwhile, experts point out a significant shortage of rice raw materials in Vietnam for producing animal feed and food products like rice noodles, rice vermicelli, and rice flour. This deficit, coupled with limited production capacity, has led to increased imports of these lower-grade rice varieties, which are more cost-effective for processing.

Rice production is a vital industry in Vietnam, providing livelihoods for tens of millions of farmers nationwide. Over the years, Vietnam has made significant strides in rice production, contributing significantly to ensuring national food security. Today, Vietnam remains one of the world’s leading rice exporters, with ever-increasing export turnover.

For 2024, Vietnam aims to achieve a rice export turnover of over $5 billion, a roughly $300 million increase from the record-breaking figure of $4.78 billion in 2023.

References: Customs, Mard, VFA