Vietnam's sugarcane production will face tough challenges when the tax rate cut down to zero percent by 2015, according to the Vietnam Business 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 of households and businesses in the sector will be miserable, said Nguyen Trong Thua, Head of Agro-forestry-fisheries and Salt production Department under the Ministry of Agriculture and Rural Development.

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

Particularly in 2013 – 2014 crop year, sugar production reached the record of 1.6 million tonnes. In this crop, sugar productivity reached the highest level ever of 5.47 tonnes a hectare.

Loc said that the sugarcane cultivation areas are scatter while technology for manufacturing process is very poor. Besides these, manual harvesting and transport which have not followed proper technique has led to the loss of 10-15 percent of the sugar, while the loss percentage in other countries has accounted for only 1-2 percent.

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

According to Loc, the issue of development plan of Vietnam ’s sugarcane industry is that the price is too high while competitive capacity remains low. Although the sugarcane yield reached 64.2 tonnes a hectare on average during the 2013-2014 crop, only 10 percent of material area reached the level of productivity of the region and currently 42 percent of the raw material areas of Southeast region is at risk of turning into other crops due to low sugarcane yield.

One important reason is that existing sugar processing technology in Vietnam is still too backward, leading to low productivity. Currently, Vietnam 's sugarcane yield is only 5.47 tonnes per hectare while in Thailand and Australia it is 8 and 12 tonnes per hectare, respectively. These restrictions 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 is 5,16 million VND and 8,432 million VND per hectare, respectively while it is 20,645 million VND per hectare in Thailand.

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

In addition, farmers and businesses need to calculate when applying science and technology in choosing sugarcane breed for stable development of the sugarcane cultivation areas.-VNA