Animal feed is packed at the Nam Viet Corporation's factory in Thai Nguyen Province. Domestic firms will find it difficult to compete with foreign firms in the local market because of hteir dependence on raw material imports. — VNA/VNS Trong Dat

HA NOI (Biz Hub)— With many domestic giants foraying into animal feed production during recent years, there is hope that domestic firms will expand their market share to compete with foreign rivals.

However, this seems a long way ahead, given the dependence on the import of raw materials and the domination of foreign-invested companies in the domestic animal feed market, which is seeing a double-digit growth rate, according to experts.

Most recently, steel giant Hoa Phat Group launched its animal feed subsidiary on Monday, which will have an annual capacity of 300,000 tonnes and is located in the northern Hung Yen Province.

Previously, Masan, An Giang Plant Protection Company, and the Hung Vuong Seafood Corporation had also entered the animal feed production sector.

The domination of foreign-invested companies in the sector has been known for years and how this problem will be tackled is of great concern for both domestic firms and management agencies.

Data from the Viet Nam Animal Feed Association showed that 59 foreign-invested firms and joint ventures own half of the market share, while 180 domestic firms hold only 20 per cent and the remainder is made up by imported products.

Two major foreign players–CP and Cargill alone–hold a combined market share of 30 per cent.

A report published by the Institute for Studies of Society, Economy and Environment has pointed out that the animal feed production sector is under the control of a few companies, adding that monopoly should be tackled to ensure healthy competitiveness.

The domination of foreign-invested companies in the animal feed production sector has resulted in 20 per cent higher prices for animal feed, compared with the regional average price.

Higher animal feed prices are also estimated to have caused a damage of up to trillions of dong to the economy as the cost for animal feed accounted for 70 per cent of the husbandry production value. In addition, higher prices have also made husbandry products of Viet Nam less competitive.

The Ministry of Industry and Trade has urged that measures be introduced to tackle the domination of foreign-invested firms in the animal feed production sector.

At the end of last year, the Minister of Agriculture and Rural Development, Cao Duc Phat, said at the National Assembly's Economic Committee meeting that the Government aimed to create a healthy competitive environment and prevent the formation of monopolies, which would harm the interests of farmers.

From the beginning of this year, a valued added tax of 5 per cent was cut to zero, aiming to ensure fairness for players in the market and support farmers in husbandry production.

Imports of animal feed and raw materials for animal feed production kept rising during the last seven years from US$1.73 billion in 2008 to $3.25 billion in 2014, customs' data indicated. Imports of animal feed and raw materials during the first two months of this year reached $170 million. — VNS