Coffee cap causes buzz

Changes are brewing in the coffee industry after a government call for a cap on coffee exports but not all industry players can see the perks.

Though a draft decree on coffee exports is still awaiting the government’s go-ahead, top executives at the ministries of Agriculture and Rural Development and Industry and Trade as well as the Vietnam Coffee-Cocoa Association (Vicofa) and local governments believe the move is necessary.

The ministries (MARD and MoIT) confirmed the proposed draft’s top objective was to boost local firms’ competitiveness against foreign-invested enterprises.

MARD’s Department of Agro-fores try and Fishery Products Processing and Salt Industry deputy head Doan Xuan Hoa said with the proposed draft only strong healthy firms could stay when coffee export conditions got tougher whereas smaller firms could team up for survival.

Vicofa’s former chairman Doan Trieu Nhan assumed such a move should have been made a long time ago as the prestige of Vietnam’s coffee prestige had taken a serious dent as a result of careless business by small exporters with neither coffee stores nor processing facilities.

Vietnam is currently home to 153 coffee export firms but there are only 20 foreign corporate buyers providing the products to eight major coffee roasting and grinding groups worldwide, according to Vicofa’s general secretary Nguyen Viet Vinh.

Getting favourable pricing terms would be tough with so many sellers and only a few buyers, Vinh said, adding that the number of eligible coffee export firms should be trimmed to fewer than 50.

MARD Deputy Minister Diep Kinh Tan also said the current coffee exporter system needed to be restructured since 70 per cent of firms were running ineffectively.

Reality shows that of the 153 coffee export firms currently operating, only 30 units are making profits and seeing strong annual export growth. Most of the others are trading firms with neither stores nor processing facilities and are coming up against constant losses.

Most local firms said they could compete more effectively with foreign-invested firms if those firms were required to engage in coffee processing and expanding coffee material areas instead of limiting activities to procurement and exports of raw coffee beans.

They also suggested giving tax codes to foreign business entities operating in Vietnam. They said many such firms with representative offices in Vietnam did not have tax codes and this meant the chance of them evading taxes was high.

Vicofa’s Nguyen Viet Vinh suggested it was vital for the coffee industry to push up production to improve Vietnamese coffee’s added value.

“Besides, establishing a fund to insure coffee production and planting has become an imperative as old coffee trees currently make up 25 per cent of the total [coffee] area [under cultivation]. The coffee industry could wither if we just focus on picking coffee and forget planting new trees to replace old ones,” Vinh said. – VIR

Tags: Vietnam Coffee, vietnam coffee exports, Vietnam coffee exports 2011