VietNamNet Bridge – Tussles between local and foreign coffee exporters in the past three to four years will come to an end on June 7 when foreign entities are banned from directly purchasing coffee from farmers and establishing coffee buying networks, says a new Ministry of Industry and Trade circular.

Circular 08/2013/TT-BTC provides detailed regulations on commodity trading and other related activities of foreign direct investment (FDI) enterprises in Vietnam.

Provision 4 of Article 3 of the circular specifies that “Foreign companies already granted export licenses are only allowed to directly purchase commodities of Vietnamese traders already acquiring business registration and import or distribution licenses for export.” Besides, the rule says these firms are disallowed to organize goods purchasing networks in Vietnam for export, including opening spots for collecting export items, except for the cases in line with local rules or international treaties to which the nation is a signatory.

Despite the modest presence of FDI enterprises specializing in coffee exports compared to hundreds of local industry players, the market share of FDI entities has surged over the past three to four years. Among 1.1-1.3 million tons of coffee shipped overseas annually, the FDI sector makes up to 60-65%.

In the Central Highlands province of Daklak where more than half of Vietnamese coffee export volume comes from, local exporters have increasingly lost their ground in buying coffee for export. Meanwhile, FDI firms have bought over 60% of the province’s total output volume even though they make up a fraction of the buyers there, says a report of the local government announced in the middle of last year.

The Vietnam Coffee and Cocoa Association (Vicofa) now has 87 corporate members including 14 foreign-invested firms. According to the association, several FDI entities have set up outlets to buy coffee directly from farmers, and this has pushed up local coffee prices on the one hand but sparked concerns among corporate buyers and authorities at home on the other hand.

Similarly, the Vietnam Pepper Association has also expressed concern about the fact that a number of FDI pepper exporters have dominated up to more than 35% of the country’s pepper exports.

Source: SGT