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Domestic coffee companies worried stiff on foreigners’ “encroachment”
The foreign businessmen’s expansion in collecting coffee directly from farmers is a big threat to domestic coffee companies.
The Dak Lak provincial people’s committee has asked the Ministry of Industry and Trade (MOIT) to allow Dakman, a foreign invested enterprise, to collect coffee directly from farmers.
Under the current regulations, foreign invested enterprises are not allowed to collect materials directly from farmers, but they have look for materials from domestic suppliers. Therefore, the proposal by the Dak Lak provincial authorities has stirred up the public and dissatisfied domestic companies, which believe that the local authorities are lending a hand to foreigners in their plan to control the domestic market.
Explaining its proposal, the Dak Lak authorities said that Dakman has cooperated with farmers to develop 3676 hectares of coffee which obtain the certificate for 4C clean coffee. The coffee growing area can provide some 12,000 tons of coffee materials a year. And it would be unfavorable for Dakman if it cannot purchase coffee directly from farmers.
However, the problem is that not only Dakman is now helping farmers grow clean coffee in the Central Highlands. Other foreign invested enterprises, including Nestle, also have the programs on growing 4C clean coffee, while hoping to increase the volume of coffee they can buy directly from farmers in the time to come.
An official from the Ministry of Agriculture and Rural Development (MARD) said the ministry welcomes the foreign investment in Vietnam’s coffee industry. Especially, the ministry acclaims the ones who invest in the processing stage in order to increase the values of coffee exports. Regarding the development of material growing areas, the ministry encourages investors from different economic sectors to invest to develop clean coffee growing areas.
However, the suggestion by the Dak Lak people’s committee has raised a wave of indignation from domestic coffee companies. Vu Duc Tien, Director of the Tay Nguyen Investment and Coffee Import-Export Company, fears that if the proposal is approved, Vietnam would see a new wave of foreign investors rushing to develop material areas in order to obtain the right to purchase coffee directly from farmers.
Many days ago, domestic companies raised their voice denouncing foreign invested enterprises of illegally collecting coffee from farmers. Meanwhile, Dak Lak and Gia Lai provincial authorities have denied the fact.
However, the Vietnam Coffee and Cocoa Association (Vicofa), has affirmed that the collection by foreigners has been existing for the last many years. Deputy Chair of Vicofa Do Ha Nam, said that in previous years, domestic companies exported 80 percent of the total coffee exports, while the figure dropped to 50 percent last crop.
The foreign invested enterprises have large networks of agents which help them collect huge volumes of coffees from farmers. According to Nam, the number of agents working for foreign invested enterprises accounts for 50 percent of the total number of collection agents existing in Vietnam, increasing by 35 percent over the previous year.
As foreign invested enterprises can borrow foreign currency loans at low interest rates, which are just equal to 1/3 of the Vietnam dong interest rates which Vietnamese enterprises have to pay, they have better financial capability to expand the coffee collection networks. Meanwhile, domestic companies, with weaker financial capability, cannot pay high to purchase coffee from farmers.
According to Vicofa, in the 2010-2011 coffee crop, a lot of Vietnamese coffee companies had to cancel contractors and accept paying fines, because they could not collect enough materials to fulfill the contracts.
Tien has warned farmers that in the immediate time, farmers can set high prices for coffee. However, later, when the material growing areas are controlled by foreigners, the sale prices would be defined by foreign investors.
vietnamnet, TBKTVN
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