MDA Consulting S.E.A. Co., Ltd.

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MDA Consulting S.E.A. Co., Ltd.
EU - THAILAND TRADE OPPORTUNITIES FOCUS ON
SUGAR
Mr. Luca Vianelli, Partner MDA CONSULTING SEA
Co., LTD
Strategy is important but execution is
everything
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SUMMARY

• Thailand and the World Sugar Market
• Sugar Market the EU new set of rules
• Thailand is the right EU Trade Partner

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Thailand and the World Sugar Market
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THAILAND AND THE WORLD SUGAR MARKET - 1

• Thailand sugar production reached the value of
  6,7 Million tons in 2006
• Thailand sugar export was 4,7 Million tons in
  2006
• Thailand sugar production 2007 forecast was 7,3
  Million tons
• Thailand sugar production reached the peak of
  7,78 Million tons in 2007
• Thailand sugar export reached the record of 5,8
  Million tons in 2007

Thai sugar production and export trends are
positive
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THAILAND AND THE WORLD SUGAR MARKET - 2
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THAILAND AND THE WORLD SUGAR MARKET - 3
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THAILAND AND THE WORLD SUGAR MARKET - 4

• In Thailand there are 7 sugar companies that can
  operate as sugar exporters
• Thailand Cane and Sugar Co.,Ltd.
• The Thai Sugar Trading Co.,Ltd.
• Siam Sugar Export Co.,Ltd. (Exporter for TRR)
• Sugar Industry Trading Co.,Ltd. (Exporter for
  Wangkanai)
• Pacific Sugar Corporation Co.,Ltd. (Exporter for
  Mitr Phol)
• K.S.L. Export Trading Co.,Ltd. (Exporter for Khon
  Kaen)
• T.I.S.S. Co.,Ltd.

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Sugar Market the EU new Set of Rules
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THE EU NEW SET OF RULES - 1

• In the EU since 1st July 2006 the Reform of the
  Common Market Organization (CMO) has been under
  way, precisely the EC no. 318/2006, 319/2006 and
  320/2006 Regulations, with reference to the sugar
  market. Basically rules which regulate the
  production and trading of particular agricultural
  products between the EU member States through the
  GATT (General Agreement on Tariffs and Trade).

• These are the Reform main topics
• The reduction of the production quota.
• The 40 reduction of beet price and also the 36
  of sugar price
• Export-refund removal
• Import-duty suppression with reference to the LDC
  Countries, APC Countries and afterwards to all
  extra-EU Countries

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THE EU NEW SET OF RULES - 2
Consequences 1) The reduction of the sugar
quota production, from 21m tons to 12m tons will
be essentially to adapt the production and
trading Community System to the WTO international
requirements, and in addition to guarantee its
future competitiveness. The establishment of a
restructuring fund through the sugar industries
contributions has been one of the most important
points of this Reform in order to facilitate this
restructuring process. The restructuring process
is causing extreme cutting of the non profitable
quota production existing in the EU like in
Italy, Greece, Portugal, Ireland and Spain giving
an advantage to other more competitive countries
like France and Germany.
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THE EU NEW SET OF RULES - 3
2) To the changes brought about by the new
European Sugar Regime there has been considerable
consolidation between the sugar companies
involved. New joint ventures for the sugar
distribution as well as several mergers
acquisitions to strengthen the production have
occurred over the last two years.
3) The gradual price cuts in more phases
for the sake of making the European goods nearest
to the world price level without any type of
subsidies. Therefore after nearly forty years of
operating a subsidized sugar policy this is a
step in the right direction towards a much more
flexible market.
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THE EU NEW SET OF RULES - 4
4) The EU will have to considerably increase its
imports, so it will be allowed - To import
sugar without duty starting on 1st Oct 2009 from
all the LDC countries and it also is under
consideration - but not yet approved - to import
sugar from all the extra-EU countries with a duty
withdrawal of 50 of the world price - Free
trade will take place starting 2015.
LDC countries Afghanistan Angola Bangladesh
Benin Bhutan Burkina Faso Burundi Cambodia
Cape Verde Central African Republic Chad
Comoros Democratic Republic of the Congo
Djibouti Equatorial Guinea Eritrea Ethiopia
Gambia Guinea Guinea Bissau Haiti Kiribati
Lao People's Democratic Republic Lesotho
Liberia Madagascar Malawi Maldives Mali
Mauritania Mozambique Myanmar Nepal Niger
Rwanda Samoa Sao Tome and Principe Senegal
Sierra Leone Solomon Islands Somalia Sudan
Togo Tuvalu Uganda United Republic of
Tanzania Vanuatu Yemen Zambia.
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THE EU NEW SET OF RULES - 5
5) The EU will certainly change its strong
active role as a big exporter of white sugar over
the last three decades to a deficit State. Now
the consumption is stable at the level of 18 m
tons while the production capacity will reach an
amount of 12 m tons in 2010. Imports will
gradually increase and as a consequence there
will be several winners and losers during the
transition both inside and outside the EU.
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Thailand is the right EU Trade Partner
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THAILAND IS THE RIGHT EU TRADE PARTNER - 1

• Thailand is one of the most interesting EU
  partners in Asia because of its economy, trading
  and logistic
• Thailand productive structure is strongly
  orientated on agricultural products exportation
• Thailand is 1 exporter of Rice, Tapioca and
  Cassava in the world
• Thailand is 2 exporter of Sugar in the world

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THAILAND IS THE RIGHT EU TRADE PARTNER - 2
What is happening in the EU is of utmost
importance not just to Europes sugar beet
farmers and sugar companies, but to the world
sugar economy. In fact considering the deficit
around 6M tons, LDC countries are having the
first key-role in a medium-term period to
guarantee the lack of quantities for EU
needs. Unfortunately these countries will not be
able to guarantee the quality specification that
the EU sugar industries absolutely
needs. However we personally believe that some
quotas with a better quality coming from emergent
countries like Brazil, Thailand or Australia can
be fixed for the free trade in EU already in 2009.
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THAILAND IS THE RIGHT EU TRADE PARTNER - 3
The trading company in the EU will be in charge
of seeking to speed things up in order to
maintain their competitiveness developing a new
source of supplying with these countries and to
find refined sugar with the minimum
characteristics the EU requires.
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THAILAND IS THE RIGHT EU TRADE PARTNER - 4

• EU Sugar market (all kinds 20 M tons/year
  market) has been closed to imports for long time
  losing competitiveness

• With the Reform EU needs to cover a gap of 6 M
  tons/ year of High Quality Sugar

• EU now allows ONLY to LDCs S a free access to
  EU market

• LDC worldwide can not afford such demand because
  of the Quantity and Quality

• Thailand has the best High Quality Sugar outside
  EU and a huge export quota available (5,8 M tons
  for export in 2010)

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THAILAND IS THE RIGHT EU TRADE PARTNER - 5

• Thailand does not export to EU because of the
  high customs duties

• EU should allow non LDC to export to its market
  a fixed quota a year of Sugar (all kinds)

• Europeans Companies could co-invest with Thai
  manufacturers in the high sugar quality refinery
  process

• Thailand could enter to EU market maximizing the
  added value of its sugar export

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THAILAND IS THE RIGHT EU TRADE PARTNER - 6

• EU should allow Thailand to have a no duty quota
  to enter into their Market

• The quota could be around 300,000 tons/year from
  2009 up to 2015

• That quota is only 5 of the EU import real need
  and do not compromise the key-role the LDCs in
  the medium term

• The quota could be slowly increased to 500,000
  tons/year accordingly to the consumption

• Europeans Companies could co-invest with Thai
  manufacturers in the high sugar quality refinery
  process (see Mitr Phol and Tat e Lyle recent
  case)

• Thailand in 2015 will enter into the EU market
  with its Super Refined Sugar (0-20 ICUMSA, the
  highest quality) in compliance with EU standards

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For further requirements please contact us
MDA Consulting SEA Co. Ltd.Bangkok
ThailandSuite 504 Tonson Building50 Soi Tonson
Ploenchit RoadBangkok 10330Tel 662
6522447 Fax [phone]Email lvianelli_at_mda.i
tWeb site www.mda.co.th