Former chairman of the (Vietnam Coffee and Cacao Association) VICOFA Doan Trieu Nhan has stated that the cost of business loans in Vietnam compared to other competing nations is hurting domestic coffee exporters.

Domestic exporters recently requested the government to endorse the granting of preferential loans to business in the segment to help them compete against foreign competitors who have deep enough pockets to enable them to snap up crops when the prices are high.

According to Luong Van Tu, current VICOFA chairman, record prices of VND50,000/kg (US$2.44/kg) paid for coffee after months of increasing prices was creating fierce competition among coffee buyers. Domestic exporters could not compete with international businesses.

VICOFA has asked the government to intervene to put pressure on foreign companies operating illegal buying networks claiming that foreign companies are restricted to investing in coffee cultivation, processing, and preservation for export, and are not allowed to buy coffee. Regardless of the validity of these claims, the rules must necessarily be eased sooner or later as Vietnam opens up more fully in line with its WTO commitments.

Nhan said the “only way forward” was for smaller domestic businesses to unite

“The government’s support is just a sticking-plaster measure,” Nhan said. “For a long-term solution, domestic coffee exporters must unite to set up large-sized firms capable of competing against foreign rivals.” 

However, Nguyen Dinh Bich, a market analyst from the Trade Research Institute, offered that support for domestic and foreign investment in the coffee processing industry would benefit farmers and exporters.

“Only this way can exporters make higher profits, with farmers being able to avoid being forced into selling coffee bean at low prices” Vietnam News (VNS) quoted Bich as saying.