Fee brews up coffee changes

Under a Vicofa plan, from October 2012 Vicofa members will be obliged to pay $2 for a tonne of export coffee to Coffee Export Insurance Fund in which around 70 per cent of the fund will go towards re-planting coffee areas, while the remaining 30 per cent for interest rate subsidy for temporary coffee storage to stabilise market prices.

Vicofa argued Vietnam could possibly lose its current status as the world’s second biggest coffee exporter behind Brazil within the next decade unless the country ramped up efforts for re-planting coffee since old coffee areas have grown sour.

Thai Hoa Group chairman Nguyen Van An said the fee was a right move on the back of current market vulnerabilities and unstable sector development.

“Finding the best way to use the fund is most important since it directly affects coffee growers,” said An.

Coffee expert Pham Khanh Hiep said the fund must channel into coffee exporters’ capacity-building activities. “Better-capacity exporters will grasp more chances for business success and farmers will benefit from higher material prices,” Hiep said.

“Business knowledge is the Achilles’ heel of local coffee firms. If this continues local firms will be left counting losses in the next 10 years,” said Hiep, adding that it would be more practical if the fund was directed into helping businesses improve knowledge, buy information updates from professional firms or hire experts to work on market surveys to benefit firms.

“Re-planning is important, but farmers can do it themselves,” Hiep added.

In fact, coffee growers are re-planting 5-10 per cent of their coffee areas annually when not any fund is in place to support them.

From other angle, Southern Centre of the Institute of Policy and Strategy for Agriculture and Rural Development  director Nguyen Anh Phong said the coffee insurance fund could render an active mechanism to bolster coffee re-planting.

“However, issues like who will get the money for re-planting their coffee areas, how much money and how re-planting will be are still unknown,” said Phong.

Another issue bothering firm heads is that only Vicofa members were subject to paying the fee.

An proposed the fee be imposed on firms’ export contracts irrespective of exporters are Vicofa members or not.

Similarly, senior coffee expert Doan Trieu Nhan assumed it would be unfair if the fee would not be levied on foreign-invested firms which currently account for over half of Vietnam’s total coffee export volume since many of them are not Vicofa members.