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.

C. V