A number of food companies based in HCM City are planning to relocate their manufacturing facilities to neighbouring provinces for various reasons including cost.

Food production at CJ food Cau Tre. VNS File Photo/thucphamcautre 

They include Uniben Company, CJfood Cau Tre and Vinamilk.

The city-headquartered Vissan Joint Stock Company has invested VND1.5 trillion (about US$65 million) in an industrial complex to produce dairy products in Long An Province.

A number of poultry egg production companies also plan to move their facilities to neighbouring provinces, according to Ly Kim Chi, chairwoman of the Association of Food and Foodstuff of HCM City.

She said in the first eight months of this year food and foodstuff companies encountered challenges, and achieved a growth rate of only 2.39 per cent year-on-year.

Disease outbreaks forced down demand for pork, affecting the food processing industry, she said.

Besides the increasing costs of transportation, warehousing, electricity, and salaries forced production costs up, she said.

Abroad, changes in export markets also had a negative impact.

Chi said China, the biggest market for Vietnamese products, had put up new technical barriers related to taxation, goods origin, quarantine, and quality verification for imported seafood.

In the US, Europe, Japan, and Korea, Vietnamese exporters benefited from lower tariffs thanks to free trade agreements with them, but technical barriers there were again posing challenges, she added.

Easier bank loans

Experts said food companies could face further challenges in the near future. A survey by the Association of Food and Foodstuff of HCM City found 85 per cent of the companies were concerned about the intense competition they could face.

Besides, most managers at these food firms had yet to understand and take advantage of the FTAs Vietnam has signed with other countries, experts said.

According to trade experts, to help food producing firms enhance their production capacity, meet quality standards and get past the new technical barriers in export markets and enhance their competitiveness in local markets, authorities should help them get easier access to bank loans to expand and upgrade their technologies.

Economic stimulus packages with preferential interest rates have been launched but it is not easy for enterprises to access them, with the experts saying their small scale of production is one of the main reasons.

This is arguably the main reason for them to move from HCM City to neighbouring provinces where they could take advantage of the lower land rentals to expand and make long-term strategic plans.

These localities also offer excellent infrastructure and logistics including transportation.

The food processing sector, one of the country’s main industries, has great potential for development, according to the experts.

In the past few years the sector has achieved steady growth of nearly 7 per cent.

Consumption of processed food is rising by nearly 10 per cent annually and is expected to further increase in the coming years.