Vietnam's sugarcane production will face tough challenges when thetax rate cut down to zero percent by 2015, according to the VietnamBusiness Forum Magazine (VBF).

According to calculations, the cost of sugarcane production in Vietnam is the highest level in the world.

If a timely and effective solution is not found, thousands ofhouseholds and businesses in the sector will be miserable, said NguyenTrong Thua, Head of Agro-forestry-fisheries and Salt productionDepartment under the Ministry of Agriculture and Rural Development.

According to Chairman of the Vietnam Sugarcane Association Nguyen VanLoc, there are now more than 310,000 hectares of sugarcane. From 2009 -2010 crop year to present, the country's sugarcane output has increasedsteadily, reaching an average of 200,000 tonnes per year.

Particularlyin 2013 – 2014 crop year, sugar production reached the record of 1.6million tonnes. In this crop, sugar productivity reached the highestlevel ever of 5.47 tonnes a hectare.

Loc said thatthe sugarcane cultivation areas are scatter while technology formanufacturing process is very poor. Besides these, manual harvestingand transport which have not followed proper technique has led to theloss of 10-15 percent of the sugar, while the loss percentage in othercountries has accounted for only 1-2 percent.

Loc added thatcomparing competitive advantage in this industry between Vietnam andThailand , the gap is quite large. Specifically, while the cost ofland rent is higher in the South-East of Vietnam than in Thailand ,Thailand has lower fertilizer costs, higher sugar yield and lowersugarcane purchase price. In Thailand , they harvest sugar at footwith no impurities; ripe sugarcane is with no exposure time andtransported by mechanical means so the loss is just under 5 percent. InVietnam , farmers harvest young sugarcane by hand; transport timetakes between 24 and 48 hours and led to the loss of 15-20 percent ofsugar in sugarcane. These factors have pushed up the price; thereforethere must be solutions to reduce production costs and increaseproductivity so that Vietnamese sugarcane can be able to compete.

Accordingto Loc, the issue of development plan of Vietnam ’s sugarcaneindustry is that the price is too high while competitive capacityremains low. Although the sugarcane yield reached 64.2 tonnes a hectareon average during the 2013-2014 crop, only 10 percent of material areareached the level of productivity of the region and currently 42 percentof the raw material areas of Southeast region is at risk of turninginto other crops due to low sugarcane yield.

One importantreason is that existing sugar processing technology in Vietnam isstill too backward, leading to low productivity. Currently, Vietnam 'ssugarcane yield is only 5.47 tonnes per hectare while in Thailand andAustralia it is 8 and 12 tonnes per hectare, respectively. Theserestrictions have led to limited income for Vietnamese farmers.Specifically, according to the Vietnam Association for Sugarcane,sugarcane profits of the Southeast region and the central Highlands is5,16 million VND and 8,432 million VND per hectare, respectively whileit is 20,645 million VND per hectare in Thailand.

As an expert,Prof. Dr. Vo Tong Xuan said that to cut the production cost, Vietnamneeds to deploy automatic sugarcane irrigation system as it is one ofthe most important factors to improve the productivity of sugarcane.

In addition, farmers and businesses need to calculate when applyingscience and technology in choosing sugarcane breed for stabledevelopment of the sugarcane cultivation areas.-VNA