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Vietnam’s coffee businesses to face losses

Vietnamese coffee businesses are facing losses, massive bankruptcies, but effective solutions haven’t been found yet.

One month ago, for the first time ever, Vietnam’s Association of Coffee and Cocoa (VICOFA) has asked its members to urgently report bad-debt situation and solution[s] to those. However, it has been stopped at “suggestion” so far, there has been still no positive change[s].

Mr. Nguyen Viet Vinh, general secretary of VICOFA, admitted that local coffee companies have many internal weaknesses related to product quality, poor business management, passive reaction to market’s volatility, especially heavily depending on bank loans. Nevertheless, the coffee industry receives little attention and support while this has still been a main export commodities of Vietnam and needs capital for long-term development.

Earlier in the regular meeting in June, the Government has already agreed to loose export credit loans for coffee exporters to a maximum of from 12 to 36 months. But Vinh says that the looseness has already resolved only a very small amount (about 9%) of bad debt at BIDV, a local state-owned bank, while more than 90% of debts are borrowed from local joint-stock banks.

“The State Bank of Vietnam and Ministry of Finance need to handle debts by grouping debt settlement capacity of borrowers. For instance, companies those who have already invested in coffee farming zones, coffee processing factories, are good at manufacturing, trading and able to settle debt need to be loosed for a long time” says Vinh and tells that in addition to debt loosing and debt isolation, VICOFA also proposes the State Bank to have a new – regulated loan.

However, the above proposal is not easily approved because most banks do not want to lend those companies. A representative of a commercial bank in Ho Chi Minh City says that loans for coffee sector are not in the priority list of this bank because, as they say, trading coffee is currently volatile and borrowers usually money for other purposes.

Mr. Nguyen Nam Hai, CEO of The Superintendence and Inspection of Coffee and Products for Export and Import Joint Stock Company (CAFECONTROL), said that in addition to bad debt, the coffee businesses are being faced with losses, massive bankruptcies without a positive solution to prevent this situation.

Meanwhile, coffee businesses those who ‘hide’ value added tax (VAT) are still popular. Tax refunding scheme for coffee exporters which has been implemented slowly in local areas and other tax – related issues lead the coffee market not operate as a market economic mechanism. For example, tax evasion businesses are willing to pay a VND 1,000 higher price per kilogram of coffee to compete against tax – fulfilled competitors. This causes great difficulties for coffee exporters in balancing their business performance.

Referring to those above difficulties, the foreign press says that Vietnam’s coffee industry was facing a heavy crisis. However, according to Vinh, not only coffee exporters face difficulties and are in debt but companies in seafood, cashew and rice are much supported. That is the point.

Vinh reveals that VICOFA is suggesting the government to issue a policy of purchasing coffee for temporary storage as it does for rice and to establish a Vietnamese coffee development fund which replaces the “old – fashioned” Coffee Export Insurance Fund. “Re-cultivation, quality enhancement and brand-building are required. The fund is also a source of support coffee industry in case of purchasing for temporary storage.” says Vinh.

»Translated by wscafe.com> original source by VnExpress.net, for Vietnamese version, please see it here. W/scafe takes its all responsibilities of the accuracy and exactness of the translated documents.

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