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

“EU - THAILAND TRADE OPPORTUNITIES: FOCUS ON SUGAR”. MDA Consulting S.E.A. Co., Ltd. Mr. Luca Vianelli, Partner MDA CONSULTING SEA Co., LTD. “Strategy is important but execution is everything”. SUMMARY. Thailand and the World Sugar Market Sugar Market: the EU new set of rules

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

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

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

  3. Thailand and the World Sugar Market

  4. 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

  5. THAILAND AND THE WORLD SUGAR MARKET - 2

  6. THAILAND AND THE WORLD SUGAR MARKET - 3

  7. 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.

  8. Sugar Market: the EU new Set of Rules

  9. 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

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. Thailand is the right EU Trade Partner

  15. 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

  16. THAILAND IS THE RIGHT EU TRADE PARTNER - 2 What is happening in the EU is of utmost importance not just to Europe’s 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.

  17. 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.

  18. 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 LDC’s 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)

  19. 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

  20. 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 LDC’s 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

  21. For further requirements please contact us: MDA Consulting SEA Co. Ltd.Bangkok ThailandSuite 504 Tonson Building50 Soi Tonson Ploenchit RoadBangkok 10330Tel: +662 6522447 Fax: +662 6522448Email: lvianelli@mda.itWeb site: www.mda.co.th

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