Coffee businesses reveal debt woes

August 14, 2013 | 15:10

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Domestic coffee businesses were preparing to report their bad debts to the State Bank and related ministries by August 15, according to Nguyen Viet Vinh, general secretary of the Viet Nam Coffee and Cocoa Association (VICOFA).

Workers of Thang Loi Coffee Export Company in the Central Highland province of Dak Lak dry coffee. Viet Nam's coffee production for the 2013-14 crop is forecast to fall by 15 per cent to 1.2 million tonnes. VNA/VNS Photo Quang Huy

Vinh said that the coffee industry had faced difficulties including a sharp decrease of 21-25 per cent in export prices from US$2,400 to $1,800 per tonne.

Coffee companies had been unable to turn a profit and subsequently incapable of paying off loans.

Ministries and agencies have instructed VICOFA to submit a detailed report and solutions for the problem.

Coffee troubles brewing

Viet Nam's coffee production in the 2013-14 crop is forecast to fall by 15 per cent to 1.2 million tonnes.

VICOFA has blamed droughts and hailstorms that occurred in June for the shortfall.

The weather destroyed 5,000ha of coffee plantations and severely affected another 27,000ha in the Central Highlands â€“ the country's largest coffee-growing area.

As of July, the country had shipped 890,000 tonnes of coffee worth $1.91 billion.

Last month's shipments fell 21.3 per cent from last July to 90,000 tonnes, and are projected to fall further in August and September.

Germany and the US were the largest importers of Vietnamese coffee, accounting for 13.1 per cent and 11.4 per cent of the market share, respectively. However, export earnings from those markets have plummeted 21.1 per cent and 28.6 per cent year on year.

VICOFA's members often struggle with high interest rates and competition from foreign direct investment businesses.

However, this is the first time VICOFA has asked its members to report on bad debt due to severity of the situation.

It estimated the association's total bad and outstanding debts with commercial banks and the Viet Nam Development Bank stood at VND6.33 trillion ($300 million).

A number of large domestic coffee companies such as the Viet Nam National Coffee Corporation (Vinacafe), Vinacafe Buon Ma Thuot, the Thai Hoa Corporation and others have fallen into difficulties due to bad debts.

In addition, tax collection in several cities and provinces, especially in the Central Highland province of Dak Lak which has the highest coffee output, have been affected.

According to the Dak Lak Taxation Department, coffee and agricultural businesses contributed around 30 per cent of the province's total tax revenue with a total of VND1 trillion ($47.8 million) a year.

In some districts, tax revenues from coffee businesses contributed up to 80 per cent of the total amount.

However, in the first half of the year, the province only collected VND1.4 trillion ($66.6 million) in taxes, a drop of 18 per cent over the same period last year, and only 38 per cent of the annual target.

VNS

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