VIETNAM RICE-PADDY INDUSTRY REPORT

VIETNAM RICE-PADDY INDUSTRY REPORT 1

Content Content Page Content Page Abbreviations 3.3 Rice-paddy cultivation Summary 3.4 Rice production 1. Business Environment 3.5 Rice consumption 1.1 Macroeconomic Situation 3.6 Rice trade 1.2 Legal Framework 3.7 Price movements 2. Global rice-paddy market 4. Industry overview 2.1 Production 4.1 Analysis of competitiveness 2.2 Consumption 4.2 Industry planning 3. Vietnam rice-paddy market 5. Enterprise analysis 3.1 History of establishment and development 5.1 Introduction of enterprises 3.2 Industry value chain 5.2 Indicators of business results 2

Content Content Page Content Page 5.3 Indicators of finance 5.4 Indicators of performance efficiency 3

DANH MỤC TỪ VIẾT TẮT DANH MỤC TỪ VIẾT TẮT Từ viết tắt Từ đầy đủ Từ viết tắt Từ đầy đủ ACFTA Hiệp định Thương mại tự do ASEAN Trung Quốc DBS Ngân hàng Phát triển Singapore AEC Cộng đồng kinh tế ASEAN DTT Doanh thu thuần AISI Hiệp Hội Gang Thép Mỹ EAEU Liên minh kinh tế Á- Âu ATIGA Hiệp định Thương mại hàng hóa ASEAN EAF Phương pháp lò điện hồ quang Bộ TN&MT Bộ Tài nguyên & Môi trường EVFTA Hiệp định thương mại Việt Nam - EU BOF Phương pháp lò thổi oxy cơ bản GDP Tổng sản phẩm quốc nội Cencus Cục Thống kê Hoa Kỳ HRC Thép cuộn cán nóng CISA Hiệp hội Sắt thép Trung Quốc IEA Cơ quan Năng lượng Quốc tế CP QL DN Chi phí quản lý doanh nghiệp ITA Cục Quản lý Thương mại quốc tế, Hoa Kỳ CPBH Chi phí bán hàng JISF Liên đoàn sắt và thép Nhật Bản CRC Thép cuộn cán nguội JPC Joint Plant Committee CTCP Công ty cổ phần KCN Khu công nghiệp 4

DANH MỤC TỪ VIẾT TẮT DANH MỤC TỪ VIẾT TẮT Từ viết tắt Từ đầy đủ Từ viết tắt Từ đầy đủ KOSA Hiệp hội sắt và thép Hàn Quốc TSCĐ Tài sản cố định LN Lợi nhuận TSDH Tài sản dài hạn OECD Tổ chức Hợp tác và Phát triển Kinh tế TSNH Tài sản ngắn hạn TCHQ Tổng cục Hải quan VSA Hiệp hội Thép Việt Nam TCTK Tổng cục Thống kê WCA Hiệp hội Than Thế giới TNHH Trách nhiệm hữu han WSA Hiệp hội Thép Thế giới TPP Hiệp định đối tác kinh tế xuyên Thái Bình Dương 5

Summary The yield of rice in the season 2016/2017 was estimated at 501.2 million tons, up 10.2 million tons from the previous year, equivalent to 2.08% - a record output while the consumption reached 478.838 million tons, increasing by 1.68% over the same period. Global rice exports in the 2016/17 season rose 2% from the 2015/16 season to reach 41.2 million tons (second highest export volume in history, behind the 2013/14 season with 44.1 million tons). The rice price in the second half of 2017 fell sharply 6

Rice-paddy is the primary food crops and also the main source of income for millions of rural households in Vietnam. Cultivated area of rice is estimated at 7.72 million hectares, decreasing by 26.1 thousand hectares and equivalent to 99.7% over the same period; the yield is estimated at 55.5 quintals / ha, decreasing by 0.2 quintals / ha and equal to 99.6%. As the cultivated area and productivity are reduced, the total rice output in 2017 is estimated at 42.8 million tons, declining by 318.3 thousand tons, equivalent to 99.3%; the rice production in the Mekong Delta is 23.7 million tons, down by 103.7 thousand tons, equivalent to 0.4%. 7

Content 1. Business Environment 1.1 Macroeconomic Situation 1.2 Legal Framework 8

1. Business Environment 1.1. Macroeconomic Situation GDP in the first 9 months of 2017 is estimated at 6.41%, of which Q1 increased 5.15%, Q2 increased 6.28%, Q3 increased 7.46% ( a record increase after many years). GDP growth, 2011 9M/2017 Sources: VIRAC, GSO Production value of agriculture, forestry and fishery, Q3/2015-Q3/2017 Sources: VIRAC, GSO 9

1. Business Environment 1.1. Macroeconomic Situation The exchange rate in the first 9 months of 2017 was quite bleak, the VND / USD exchange rate was not volatile and remained around 22,350, up to 22,470 on September, 30 th. VND/USD exchange rate, 2016-9/2017 The average interest rate is on the downward trend Interest rate, 2011 9M/2017e Sources: VIRAC, SBV Sources: VIRAC, GSO 10

1. Business Environment 1.1. Macroeconomic Situation Vietnam's export turnover in the first nine months was estimated at $ 154.32 billion, increasing by 20% over the same period last year, Million USD Imports and exports, 2014 Q3/2017e Proportion value of rice-paddy industry contributing to Vietnam exports, 2010 2017 Thousand USD % Sources: VIRAC, GDVC Rice is the main export product of Vietnam, however, the contribution of pepper to total export turnover is limited, which is only 1.2%. Sources: VIRAC, GDVC 11

Content 1. Business Environment 1.1 Macroeconomic Situation 1.2 Legal Framework 12

1. Business Environment 1.2. Legal Framework Legal policies related to inputs Land polices related to rice-paddy cultivation Paddy land protection Policies of land allocation limit 13

1. Business Environment 1.2. Legal Framework Limit of agricultural land allocation due to Land Law 2013 Area/purposes Annual crops cultivation, aquaculture land, salt making land Perennial plant cultivation Protective forest land, production forest land Policies related to agricultural property 14

1. Business Environment 1.2. Legal Framework In addition, the policy on agricultural land mentions many shortcomings:: 15

1. Business Environment 1.2. Legal Framework 2. Credit policy for agricultural in general and for rice-paddy in particular 16

1. Business Environment 1.2. Legal Framework 3. Irrigation policy 4. Rice-paddy production policy High output encouragement and food security guarantee policy 17

1. Business Environment 1.2. Legal Framework 5. Rice export policy 18

1. Business Environment 1.2. Legal Framework 6. Regulation on floor price for rice production 19

Content 2. Global rice-paddy market 2.1 Production 2.2 Consumption 20

2. Global rice-paddy market 2.1 Production Global rice-paddy production, 2008/2009-2016/2017 Rice production output in the season 2016/2017 was estimated at 501.2. million tons, increasing by 10.2 million tons from the previous year, and reached record levels in history. The structure of rice production output by regions, 2016/17 Sources: VIRAC, STATISTA, FAO In Africa, rice output in the year increased by 1% compared to 2016, reaching 20.3 million tons. Sources: VIRAC, STATISTA, FAO 21

2. Global rice-paddy market 2.1 Production Asia has a steady growth rate, though not all areas are supported by weather, but thanks to government support policies. The structure of rice production output by countries, 2016/17 Sources: VIRAC, USDA 22

2. Global rice-paddy market 2.1 Production Central America and the Caribbean increased by 2% to 1.9 million tons despite difficulties in weather with major storms such as Irma and Maria. 23

Content 2. Global rice-paddy market 2.1 Production 2.2 Consumption 24

2. Global rice-paddy market 2.2 Consumption Rice consumption in the period from 1960/61 to 2016/17 Thousand tons Sources: VIRAC, USDA periods. After 56 years, global consumption in 2016/17 has reached 478,838 thousand tons, increasing by 206% compared to the previous 25

2. Global rice-paddy market 2.2 Consumption Asia is the most rice-consuming region in the world Rice consumption by regions in the season 2016/2017 Sources: VIRAC, USDA 26

2. Global rice-paddy market 2.2 Consumption Million tons Rice consumption by using purposes, 2012-2017 Nine out of ten of the largest rice consumers in the season 2016/17 are Thousand tons located in Asia (except Brazil). Sources: VIRAC, FAO Top 10 largest rice consumers in the season 2016/17 Sources: VIRAC, FAO 27

2. Global rice-paddy market 2.2 Consumption Kg/person Rice consumption per capita in the regions, 2006 & 2016 Rice consumption per capita in the world in 2016 reached 54.57 kg / person, lower than 2006 with 56.5 kg / person. Sources: VIRAC, OCED Changes in consumer incomes have impacted on rice consumption per capita. Incomes and rice consumption per capita of some countries in 2016 Kg/person USD Sources: VIRAC, OCED 28

Content 3. Vietnam rice-paddy market 3.1 History of establishment and development 3.2 Industry value chain 3.3 Rice-paddy cultivation 3.4 Rice production 3.5 Rice consumption 3.6 Rice trade 3.7 Price movements 29

3. Vietnam rice-paddy market 3.1 History of development and establishment Establishment history of Vietnam rice-paddy industry Rice-paddy area and output, 1961-2015 Sources: VIRAC, FAO The period from 1885 to 1954: French colonial period: development of innovation rice-paddy cultivation 30

3. Vietnam rice-paddy market 3.1 History of development and establishment The period from 1954 to 1975 The period from 1976 to 1980 31

3. Vietnam rice-paddy market 3.1 History of development and establishment The period from 1981 to 1987: The period from 1988 to the present 32

3. Vietnam rice-paddy market 3.2 Industry value chain Rice-paddy production and distribution chain 1. Cultivation Source: VIRAC collected 34

3. Vietnam rice-paddy market 3.2 Industry value chain 2. Purchase, processing 35

3. Vietnam rice-paddy market 3.2 Industry value chain 3. Domestic distribution Structure of domestic rice distribution market in 2016 Source: VIRAC collected 36

3. Vietnam rice-paddy market 3.3 Rice-paddy cultivation Rice-paddy cultivated seasons Rice-paddy area and output in the 3 seasons of the period from 2010 to 2017e Main rice-paddy cultivated seasons in Vietnam Regions Seasons Cultivating time Sources: VIRAC, GSO 38

3. Vietnam rice-paddy market 3.3 Rice-paddy cultivation In 2017, due to the conversion of cultivated area and the impacts of pests, the area, yield and output of rice in winter-spring seasons in 2017 have decreased. The area of winter-spring rice cultivation in 2017 reached 3,077.4 thousand hectares, reducing by 5.7 thousand hectares in comparison with the previous winter-spring season. The area of summer-autumn rice cultivation in the whole country in 2017 reached 2,106.3 thousand ha, equivalent to the summer-autumn season of 2016; the productivity was estimated at 54.5 quintals / ha, increasing by 0.7 quintals / ha; production reached nearly 12.2 million tons, decreasing by 2.7 million tons, equivalent to 18 percent. 39

3. Vietnam rice-paddy market 3.3 Rice-paddy cultivation The weather is still unfavorable and pests are the main causes for the output of paddy rice in 2017 less than the same period. The area of paddy in 2017 is 1.76 million ha, decreasing by 17.5 thousand ha and equal to 99% compared to the seasons in 2016; the productivity is estimated at 46.4 quintals / ha, decreasing by 1.4 quintals / ha; production is estimated at 8.2 million tons, decreasing by 327.3 thousand tons and equal to 96.2%. 40

3. Vietnam rice-paddy market 3.3 Rice-paddy cultivation Rice-paddy cultivated area by regions, 2010-2016 Sources: VIRAC, GSO 41

3. Vietnam rice-paddy market 3.3 Rice-paddy cultivation Rice seeds Fertilizer Fertilizer application for rice cultivation averaged over 1ha Kg/ha Sources: VIRAC, WB 42

3. Vietnam rice-paddy market 3.4 Rice production Thousand tons Vietnam rice production from 2010/11 to 2017/18 Sources: VIRAC, USDA 44

3. Vietnam rice-paddy market 3.5 Rice consumption Thousand tons Vietnam rice consumption from 2010/11 to 2017/18 The structure of rice consumption by volume, 2017e Sources: VIRAC, USDA Sources VIRAC, OCED 46

3. Vietnam rice-paddy market 3.6 Rice trade Export volume and value of rice, 2010 2017 Sources: VIRAC, GDVC 2017 is considered as a successful year for the rice industry. The rice export volume reached 5.789 thousand tons, increasing by 20.4%, the export value of rice reached 2.616 thousand USD, increasing by 21.2%. 48

3. Vietnam rice-paddy market 3.6 Rice trade In 2017, China is Vietnam s largest rice import market, The structure of rice export by volume, 2017 Sources: VIRAC, GDVC The structure of rice export by products, 2017e Sources: VIRAC, USDA 49

3. Vietnam rice-paddy market 3.6 Rice trade Concentrated export contract of rice Rice proportion exported under concentrated export contract, 2007-2015 Sources: VIRAC, GDVC 50

3. Vietnam rice-paddy market 3.6 Rice trade The structure of rice exports by output, 2017 Sources: VIRAC, GDVC Prior to the issuance of Decree 109/2010 / ND-CP on management of rice export business, the number of enterprises involved in exporting rice was up to more than 200 enterprises. 51

3. Vietnam rice-paddy market 3.7 Price movements Comparison of the asking price for exported rice between Thailand and Vietnam in 2017 USD/ton Sources: VIRAC, Department of Price Management Months Domestic price for rice in 2017 Ordinary rice in the North Finished product of rice-paddy in the South (5%) 53

Content Industry overview 4.1 Analysis of competitiveness 4.2 Industry planning 54

4. Industry overview 4.1 Analysis of competitiveness 5 FORCES analysis 55

4. Industry overview 4.1 Analysis of competitiveness Strenghts: Weakness: Opportunities: Threats: 56

Content Industry overview 4.1 Analysis of competitiveness 4.2 Industry planning 57

4. Industry overview 4.2 Industry planning Planning 58

4. Industry overview 4.2 Industry planning Orientation of rice production by regions 59

4. Industry overview 4.2 Industry planning 60

Content Enterprise analysis 5.1 Introduction of enterprises 61

TOP OF THE LARGEST RICE-PADDY ENTERPRISES WITH THE GREATEST REVENUE IN 2016 Name Address Tax code Total asset (million VND) Net revenue (million VND) VINAFOOD II VINAFOOD I KIGIMEX TAN THANH AN COMPANY LIMITED TAN DONG TIEN JSC GIA INTERNATIONAL CORP TIN THUONG INVESTMENT TRADING JSC. THUAN MINH IMPORT EXPORT CORPORATION AGRICAM VIETNAM INTIMEX JOINT STOCK CORPORATION 62

VINAFOOD II 63

VINAFOOD I 64

Kigimex 65

TAN THANH AN COMPANY LIMITED 66

TAN DONG TIEN JSC 67

GIA INTERNATIONAL CORP 68

TIN THUONG INVESTMENT TRADING JSC 69

THUAN MINH IMPORT EXPORT CORPORATION 70

AGRICAM 71

VIETNAM INTIMEX JOINT STOCK CORPORATION 72

Content 5. Enterprise analysis 5.2 Indicators of business results 5.3 Indicators of finance 5.4 Indicators of performance efficiency 73

5. Enterprise analysis 5.2 Indicators of business results Billion VND Net revenue of 10 enterprises in the industry, 2015 2016 Source: VIRAC collected 74

5. Enterprise analysis 5.2 Indicators of business results 75

5. Enterprise analysis 5.2 Indicators of business results Gross profit margin, 2015-2016. Source: VIRAC collected 76

5. Enterprise analysis 5.2 Indicators of business results. 77

5. Enterprise analysis 5.2 Indicators of business results Cost of sales/net revenue, 2015-2016. Source: VIRAC collected 78

5. Enterprise analysis 5.2 Indicators of business results Enterprise cost management/net revenue, 2015-2016 Source: VIRAC collected Financial expenses/net revenue, 2015-2016 Source: VIRAC collected 79

Content 5. Enterprise analysis 5.2 Indicators of business results 5.3 Indicators of finance 5.4 Indicators of performance efficiency 80

5. Enterprise analysis 5.3 Indicators of finance Average number of receivable days, 2015-2016 day Source: VIRAC collected 81

5. Enterprise analysis 5.3 Indicators of finance Solvency ratio, 2016 Source: VIRAC collected Inventory day, 2016 day Source: VIRAC collected 82

5. Enterprise analysis 5.3 Indicators of finance Asset structure and total assets turnover in 2016 Source: VIRAC collected Debt structure and debt/equity ratio 2016 Source: VIRAC collected 83

Content 5. Enterprise analysis 5.2 Indicators of business results 5.3 Indicators of finance 5.4 Indicators of performance efficiency 84

5. Enterprise analysis 5.4 Indicators of performance efficiency Profitability on assets and equity, 2016 Source: VIRAC collected 134

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