Seeking direct contracts

As a key export item, coffee products earned US$1.8 billion in 2008, but it is suffering numerous difficulties this year as the export price of coffee is dropping on the world market.

Hoang Vinh Tuan, director of the Thai Hoa Coffee Company – a leading Vietnamese coffee exporter, says that the demand for coffee product only saw a light decrease, but the price continues to fall. Moreover, foreign speculation funds have teamed up to corner the global coffee market, resulting in a sharp decrease in coffee prices, from US$2,800/tonne in March 2008 to US$1,560/tonne at present.

Domestic coffee businesses are facing many difficulties caused by the falling price of coffee, particularly large-scale producers with substantial investment capital.

According to Mr Tuan, some businesses have surfed big losses, worth billions of VND, as their export price was VND1 million per tonne lower than the price of input materials. To cope with this, he said, his company has had to reduce its reliance on coffee traders to export their coffee products. The company is looking for ways to promote direct contact with coffee producers rather than traders.

He suggests that apart from traditional markets, such as the United States and the European Union, domestic coffee exporters should focus on other markets, such as China and Taiwan. The Thai Hoa Coffee Company plans to open a representative office in Geneva, Switzerland, where there are a large number of world leading coffee groups, in order to seek out contracts for Vietnamese coffee products.

Mr Tuan emphasises that promoting direct contract is very important for loss-making domestic businesses that are finding it difficult to access loans. Furthermore, building up brand names for businesses needs more time and money. However, as a world leading coffee exporter, Vietnam should play due attention to promoting its own trademarks.

The Ministry of Industry and Trade reports that in the first three months of the year, Vietnam earned US$13.47 billion in revenue, up by 2.4 percent against the same period last year. However, there was a sharp decline in the export earnings of 13 staples such as footwear, seafood, coffee, cashew nuts, textile and garments and electronics.

Vietnam is the world’s second largest exporter of coffee, but the country does not have any trade in markets that have a decisive impact on its export prices, complained Mr Tuan.

Meanwhile, Tran Van Thang, an official of a textile company in the port city of Haiphong, says that direct exports remain the best way of boosting exports during the current economic slowdown.

“So far we have mainly exported under subcontracts with foreign partners, which is not very profitable. Only by exporting directly and developing our trademarks can we raise our profits and compensate for the drop in orders,” he further says.

Lack of information

Many Vietnamese enterprises complain about poor access to information even in the internet age.

“Full and accurate information would help businesses to expand their export activities in an effective manner but they are still lacking information about both markets and partners,” Tran Van Thang says.

Nguyen Van Thu, vice chairman of the Vietnam Tea Association, noted that enterprises have had to spend tens of thousands of dollars getting information from a variety of different sources abroad, but the information is most often outdated.

The Deputy Minister of Industry and Trade, Nguyen Thanh Bien, has admitted that despite a wide network of trade bureaux overseas and research agencies at home, his ministry has not done enough to provide enterprises with up-to-date, high-quality information.

Mr Bien says that the ministry will pay more attention to the demand from enterprises for information and improve the efficiency of its portal for information on overseas markets. Specifically, the portal will focus on major commodities and update the information on price fluctuations within 10-15 days.

In addition, the Ministry will launch a website for Vietnamese exports in English this year to serve both domestic and overseas businesses. It will also focus on forecasting prices in Vietnam and the rest of the world to help enterprises export their products.