Foreign businessmen scrambling to collect coffee

Foreign businessmen are jumping on the bandwagon, scrambling to purchase coffee with Vietnamese businessmen. Analysts have warned that once foreign businessmen control the market, they will force collection prices down, thus making farmers suffer.

Van Thanh Huy, General Director of Inexim Daklak Company, complained that there is an unhealthy competition in collecting coffee from farmers.

Huy related that when the new crop began, Inexim Daklak spent money to help 100 households in Cu M’gar district in Daklak province to grow 100 hectares of coffee. Farmers were given technical guidance, a variety of coffee and received advanced money to pay for fertilizer and oil for watering. The company plans to buy 300 tons of coffee from the households when they harvest. However, it could only collect less than 50 percent of the planned volume, because foreign businessmen had already purchased most of the coffee.

“This is a kind of unhealthy competition. Inexim Daklak made an investment, but it cannot reap the benefits ,” Huy complained.

Meanwhile, Do Ha Nam, General Director of Intimex complained that the interest rates of the dong loans given to Vietnamese coffee trading companies are overly high at 18-20 percent per annum. Meanwhile, foreign enterprises can borrow loans in dollar at a low interest rate of only 5.5 percent per annum. Therefore, it is understandable why foreign businessmen can pay higher prices to collect coffee.

In order to export coffee products at an export price of $2200 per ton, Inexim Daklak had to buy coffee at 48,000 dong per kilo. “We do not fear competition, because competition is a part of the market. But the competition must be healthy,” he said, adding that Vietnamese and foreign businessmen must operate in the same conditions and enjoy the same lending interest rates.

Meanwhile, the Vietnam Cocoa and Coffee Association has voiced its protest against foreign businessmen collecting coffee, saying that by collecting coffee directly from farmers, foreign businessmen are violating the laws. The association cited the Circular No 09 issued by the Ministry of Industry and Trade as saying that foreign invested enterprises that have a license to export products must not establish its own network to collect products for export. A provision of the same circular said that foreign invested enterprises can directly purchase goods from the businessmen. who have the licenses to trade or distribute goods, for export.

Bad consequences warned

The fact that foreign businessmen are trying to collect coffee has made farmers feel happy because foreign businessmen always pay higher than Vietnamese enterprises. However, analysts have warned that this may not be as good news as people think.

It may happen that, analyst say, at first, foreign businessmen will push the prices up in order to gain the upper hand on the market. However, after that, when they control the market as Vietnamese enterprises get knocked out, they will force the prices down.

“Vietnamese enterprises with limited financial capability may not be able to compete with foreign enterprises and they may go bankrupt,” said Do Ha Nam from Intimex.

In 2008, a foreign company was once accused of deliberately undermining Vietnam’s cocoa industry. The company specialized in collecting low quality cocoa in Vietnam which has an impurities content of up to four percent (the standardized level was one percent). With the move, the company prompted small merchants and farmers to mix impurities into cocoa.

At that time, analysts pointed out that the forementioned foreign company wanted to become the sole collector in Vietnam, therefore, it spent money to collect cocoa in Vietnam with low requirements.

After a lot of criticism, the enterprise had to heighten the required quality of its cocoa. – Vietnamnet

Tags: Vietnam Coffee, Vietnam coffee prices