Challenges of Vietnamese Coffee on Int’l Integration

 

 

Coffee production is an important income source of Vietnamese farmers, particularly those in mountainous and rural areas. The coffee sector attracts 600,000 labourers and more than one million people live on coffee-related activities. Last year, Vietnam’s coffee area reached up to 520,000 hectares. The country obtains average annual coffee output of over 900,000 tonnes, accounting for 8 per cent of the country’s total agricultural output and 15 per cent of the agricultural export value. These very impressive figures makes coffee to be an essential agricultural product of Vietnam, bringing the nation the world’s second largest coffee exporter and producer and the largest robusta coffee exporter worldwide.

Since 2001, Vietnam’s coffee export revenue has increased by nearly 31 per cent per year. In the 2007 and 2008 period after the country’s WTO entry, the coffee export revenue rose by 53 per cent to US$2.3 billion last year, standing in the group of export items with revenue of over US$2 billion. Vietnamese coffee are now present in over 100 countries and territories across the world, including big markets such as Spain, Japan, South Korea and the US and new ones like Africa and Eastern Europe.

 

According to the Ministry of Industry and Trade, the WTO membership has offered many opportunities for the country’s coffee export. This helps facilitate market survey and contract signing for the coffee export as Vietnamese coffee has become a favourite product in the world.

 

To raise coffee export value, the country has deployed a series of strategies. Vietnam has paid attention to a closed process in coffee production and business from growing, harvesting, preservation, storage and export.

 

Despite standing in the world top coffee exporters, Vietnamese coffee has showed its weaknesses in the process of cultivation, processing and export.

 

The local coffee sector posts a high status, but not stable in the global market. This is proved by the fact that farmers still base on short-term signs of the market to grow long-term crops, leading to losses. Farmers still lack market information and international standard regulations; therefore, they lose many opportunities to sell their products.

 

Although Vietnam’s robusta output tops the world, its quality remains limited due to weak harvest and backward processing technology (mainly dry processing in wet weather, causing fungus and bad quality). Around 65 per cent of Vietnamese coffee are type II with 5 per cent of black and broken beans and moisture of 13 per cent. This has seriously affect the local coffee prestige and prices.

 

Currently, up to 90 per cent of Vietnam’s coffee area needs irrigation but the irrigation system remains poor. As a result, growers have to use well water, slowing down coffee growth. Coffee life-span is some 25 years. From the 16^th year, the productivity will gradually drop. However, according to the Vietnam Coffee-Cacao Association, the country is now home to 139,000 hectares of coffee at the age of 15-20 and 86,400 at over 20 years out of the country’s total area of 520,000 hectares. In the coming time, more than 50 per cent of the harvested coffee area re-grown, affecting coffee output in the future.

On the other hand, in Vietnam, coffee is often produced at small-scaled farms. Up to 85 per cent of coffee are cultivated on farms of less than two hectares, reducing modern scientific application effect as well as capital assess. In spite of the Ministry of Agriculture and Rural Development’s recent decision in coffee growing area planning and development, many farmers grow coffee spontaneously due to the crop’s high value. More seriously, most of the spontaneously-grown coffee area is situated at places which are not suitable for coffee such as shadow soil layer, high slope and locations lacking irrigation system.

 

Besides, scattering and small-scale coffee result in high investment costs and difficulties in sci-tech advances, bringing low-quality coffee. Therefore, farmers have to suffer from huge losses, discouraging them from coffee production.

 

Along with farmers on the way to affirm Vietnamese-branded coffee, coffee processors and exporters also face challenges. In 2008, not only farmers suffer from price hikes of input materials (fertilizer, pesticides and fuel) but also encounter increase of interest rate, sharp decrease of USD/VND exchange rate and costs for coffee material purchase. Statistics showed that last year up to 20 per cent of Vietnamese coffee processors and exporters had financial difficulties and even went bankruptcy. Some 50 per cent of small and medium-sized enterprises were in a very critical situation. Businesses met barriers in the domestic market but also in coffee export. At a conference entitled “Prospect of Vietnamese agriculture sector” which ended on March 25, Nguyen Anh Tuan, a representative from Control Dak Lak said Vietnamese coffee export has to be carried out intermediate stage. Thus, exporters do not enjoy maximal profits, while unfair and price squeeze will continue.

 

Currently, Vietnamese coffee sector is encountering lots of challenges ahead. The world market changes and complicated weather conditions have also badly impact the sector. Furthermore, farmers are in need of necessary information about technique to take care of coffee. While growing coffee in improper land areas is still popular. Despite improved coffee quality, picking up unripe coffee continue, particularly coffee stealing is more complicated. The country does not have a price mechanism for different kinds of coffee. Modest coffee growing scale lowers investment effect and coffee quality.

To improve the situation, the government needs to enhance capital assistance for farmers and companies to help them develop production and expand coffee area. It is important to have to a programme to disseminate experience to select coffee seeds, plant and take care of coffee for farmers. On the other hands, ministries and agencies should appropriate policies to form a legal corridor to assist banks to raise coffee competitiveness in the global market. The world integration brings Vietnamese firms both chances and challenges such as design and trademark appropriation. This asks concerned agencies to join hands closely to protect Vietnamese coffee brand. It is needed to implement market management activities well, provide legal information timely and integrate trade promotion activities into technical consultancy and enterprise assistance. But most importantly, coffee processors and exporters have to improve technology, machines, product quality to sharpen the local coffee prestige in the global market.

It is difficult to build a brand but how to keep it grow is more difficult. Vietnamese coffee has gained a foothold in the world market but how to maintain it depends on the country’s policies. The government, concerned agencies and farmers should join hands for the development of Viet coffee brand.