Beyond the pail
Upbeat on prospects for expanding its dairy
industry, Vietnam shouldn't ignore the potential risks
HANOI - A beauty contest is under way in Ho Chi Minh
City, with participants hailing from Australia, Israel and
the United States. They're all cows--literally--and
entrepreneur Dang Ngoc Hoa is judging them on
productivity and cost. Determined to acquire 1,600 dairy
cows by mid-2003, Hoa is just one private player in
Vietnam's plan for massive expansion of its dairy
industry. Currently importing 90% of its milk products,
Vietnam seeks to quadruple its dairy cattle over the next
eight years to meet rising demand and boost rural
incomes.
But milk is risky business. A rapid dairy build-up
threatens to turn sour unless farmers are provided
sophisticated training in feeding, milking and hygiene. As
neighbouring Thailand has already learned, most dairy
cows have trouble adapting to tropical climes.
The dairy initiative is also an important test of Vietnam's
commitment to free trade. In its December bid to join the
World Trade Organization, Vietnam proposed tariffs of
40%-50% on a range of milk products--a sharp increase
from the current 15% rate. While the tariffs remain open
to negotiation, foreign exporters worry that Vietnam
intends to erect protectionist barriers. High levels of
protection and subsidies would "foster inefficiencies in
the industry and drive up the cost of the product to the
consumer," says Malcolm McGoun, New Zealand's
ambassador to Vietnam.
His country has a vested interest: Last year it exported
more than $151 million-worth of milk, butter and cheese
to Vietnam, 83% of its total exports to the country.
Vietnam's total imports of milk products amount to $330
million annually.
Still, consumer concerns are valid. Ironically, if milk
became less affordable for Vietnamese families, that
would undercut the government's interest in promoting
child nutrition. Vietnamese now drink 14 times as much
milk as they did a decade ago. But it remains beyond the
reach of many poor rural households, and the per-capita
consumption of 6.5 litres is still low compared to 34 litres
in Malaysia, 27 litres in Thailand and up to 150 litres in
some European countries.
While the government promotes its dairy initiative as a
sure path to increased rural prosperity, foreign
consultants remain doubtful. "Dairy production will not
resolve the problems of low incomes for the vast
majority of Vietnam's farming sector," says a new
European Commission report. One reason: If a poor
farmer managed to purchase one or two dairy cows,
those animals wouldn't yield the same high-quality milk
as herds of 5-20 cows, which would be milked
mechanically in a more hygienic fashion. Although EC
experts generally support the idea of increasing
Vietnam's milk production, they also warn that official
calculations are based on "very high productivity levels
that may be difficult to achieve and sustain at individual
farmer levels."
Milking it
Just look at Thailand, which supplies 37% of its own
milk. According to one local university report, "the
national milk yield remains dishearteningly stagnant,"
around 6.5 litres per cow per day, just a trickle compared
to the 40 litres that gush daily from cows in Europe.
Much of the trouble lies in the perpetual heat and
humidity, low-quality feed and farmers' limited access to
livestock experts, the report says.
Large investments and careful planning could make
ambitious schemes pay off. In southern Vietnam, the
Dutch-Vietnamese joint venture, Dutch Lady Vietnam
Food & Beverage, is pumping $6.6 million into an
initiative extending through 2006. The firm collects fresh
milk daily from 1,100 farmers in four provinces, offers
veterinary health training, distributes milking machines
and organizes feed purchases. "It has to be managed in a
controlled way, step by step," says Jack Castelein, the
company's general director.
If not, farmers could be saddled with diseased or
unproductive cows. Long-distance transport of delicate
pregnant cows has already caused highly publicized
distress in Vietnam, with recent arrivals from the U.S.
and Australia marked by some fatalities, injuries,
infections and miscarriages.
Given such transport woes, why not turn to artificial
insemination? Unfortunately, the only authorized place in
Vietnam to purchase bull sperm is an ageing government
centre that Cuba helped establish.
"Private companies don't want to buy from the centre
because they think the quality is not good," explains one
Vietnamese official. In this beauty contest, nothing can
replace good breeding.
By Margot Cohen - The Far Eastern Economic Review - June 20, 2002.
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