Last updated: Thursday, May 16, 2013
Coffee Export Fee: Worrying Domestic BusinessesPosted: Monday, March 19, 2012
Speaking of the collection of US$2 fee on a tonne of coffee exported, Mr Nguyen Tri Ngoc, Director of the Department of Cultivation under the Ministry of Agriculture and Rural Development, said, it is extremely unfair to collect fees from Vicofa-member companies while it is free for non-Vicofa companies and foreigners. At present, Vietnam has more than 150 coffee exporters. Thus, it is necessary to screen exporters by compulsory measures in order to sustain the development. Luu Hiep reports.
Foreign companies are purchasing and exporting about half of Vietnamese coffee. According to the new regulations, do you think it will be unfair on the domestic coffee market?
In recent years, Vietnamese coffee exporters have faced plenty of difficulties, even went bankrupt; thus, the new fee will send them to a more difficult situation. It is true that foreign companies are directly buying and exporting about 50 percent of Vietnamese coffee output. Therefore, it is extremely unfair to collect fees from Vicofa-member companies while it is free for non-Vicofa companies and foreigners.
On the other hand, foreign enterprises have a lot of advantages over domestic ones. Especially, they have a bigger financial capacity, enjoy much lower interest rates and have vast markets. If foreign companies are excluded from the fee-imposing list, they will more easily crush domestic fee-paying rivals.
The Vietnam Coffee and Cocoa Association (Vicofa) says a standpoint that the Vietnamese coffee industry will not have fund for reinvesting in coffee trees if the surcharge is not applied. This means that the coffee industry will hardly develop sustainably in the future.
I think Vietnamese coffee trees are growing very well. For the time being, coffee growers have mastered techniques for growing, tending, harvesting and replanting coffee trees. They take care of their own coffee as a way to achieve best economic result. Therefore, they themselves know what coffee varieties are good. They also apply old-tree replacing methods to boost up productivity and quality. Their new practices are very economically and sustainably effective. It is certain that we are living in a market economy and the State does not have to support coffee planting.
The purpose of the fee collection is to use part of it to support coffee growers. However, how to allocate it reasonably is the most difficult task. Do you agree on this?
It is true that the toughest difficulty facing the coffee export fund is how to allocate the money and who to receive. Currently, coffee growers capably self-invest for their coffee trees while the funding from the coffee export fund is small for coffee cultivation. I assume that exporters pay US$1 million for the fund a year, how much coffee farmers will receive. Actually, it is very difficult to deal with this.
At a recent meeting between the Ministry of Agriculture and Rural Development and associations of agricultural, forestry and aquatic businesses, an inside representative said Vicofa already has ways to create the budget for the fund. What can you say about this?
As far as I am concerned the State does not need to finance the fund. It only needs to create a mechanism for Vicofa to collect from fee payers. The fund will collect US$2 per tonne of coffee exported and Vietnam ships 1.2 million tonnes of coffee abroad a year, with Vicofa members holding 600,000 tonnes. Thus, the fund will collect some US$1 million a year.
As a member in the Vietnam Coffee Coordinating Committee, how should this fund be used to increase efficiency?
If the fund is used to support coffee exporters at the time of price tumble, it is not enough and it cannot help send up coffee prices. I agree on the opinion of renaming the fund to the Coffee Insurance Fund Vicofa leaders have proposed. But, I think this fund should be used for production too, not just export. Most of the funding should go to coffee replanting.
I think the fund necessarily collects the fee from all companies, including of foreign companies operating in the country. Indeed, they are holding far better advantage over Vietnamese companies. If we can do this, in my opinion, most coffee companies will support.
Besides, according to Vicofa’s plan, up to 50 - 70 percent of the fund will be channelled for replacing old tree areas, about 30 percent will be used for financing temporary stockpiling, and the rest will be spent on trade promotion.
However, at the bottom of my heart, I think the Vietnamese coffee industry is primarily exporting simply processed beans, it should focus more on quality, rather than quantity Vicofa proposed that to get a slot in coffee export, each coffee enterprise needs to have at least one production base with an annual capacity of above 500 tonnes - a move aimed to reduce the number of coffee traders].
Creating "open" bank loan-based mechanism
Mr Doan Trieu Nhan, senior coffee specialist
Collecting coffee export fees is a good idea if Vicofa proves this revenue beneficial to businesses and the coffee industry. I think persuading companies to join this policy is not difficult. For the time being, some coffee exporters fail to meet requirements like financial capacity and available cash to borrow money from banks to join business projects. Therefore, capital is always a daunting challenge, especially when the coffee is being harvested. Besides, the term of three months of working capital loans is too short for a cycle of commodity trading and hardly any companies can satisfy this requirement. Moreover, current high interest rates are also an obstacle because a borrower has to pay VND700 of interest money to bank on each kilo of coffee kept in a month. Hence, bank loan solution for coffee exporters is also a priority.
Building special coffee development zone
Dr Vo Dai Luoc, Former Director of Institute of Economic Studies and World Politics
To date, there are not any fundamental solutions to sustaining coffee development and increasing coffee growers’ incomes. Thus, we should build a national coffee development special zone in Dak Lak province - the capital of Vietnamese coffee industry. It will reassemble a special economic zone where there is a strong linkage of coffee farmers, businesses and consumers. The interest harmony of producers, processors and traders is placed on top. Then, the coffee industry will truly develop sustainably.