Coffee companies face internal challenges

09:11 | 23/08/2015 Trade

(VEN) - Vietnamese coffee will more easily access foreign markets after Vietnam signs related free trade agreements (FTAs). But domestic coffee companies will still need to know how to make the most of this opportunity.

Coffee companies face internal challenges

It is necessary to apply a financial institution for coffee businesses to improve their processing technology

Opening international markets

According to the Vietnam Coffee and Cocoa Association (Vicofa), Vietnam has exported from 93-95 percent of its total coffee production to 80 countries and territories worldwide, with Europe and the US being its two largest importers.

Vietnam currently exports Robusta coffee beans (for blending), which is low in terms of added value, but eligible for the zero import duty. Meanwhile, its processed coffee exports are suffering from heavy import duties when entering foreign markets, especially the European market. Particularly, roasted, ground and instant coffee exports are subject to the 8-10 percent import tax rates.

According to Vicofa Secretary General Nguyen Viet Vinh, these tax rates are relatively high. “We expect the FTA between Vietnam and the EU will help reduce the rates,” he said.

Many experts also agreed that a series of completed FTAs would help Vietnam integrate deeper into the global supply chain and offer Vietnamese coffee companies better opportunities to increase processed coffee exports. The Ministry of Agriculture and Rural Development has also intended to raise the proportion of processed coffee in the coffee export structure from 10-20 percent. Vietnam would increase coffee exports to the European market by 30-40 percent after tax reduction.

Identifying trade barriers

In addition to tariff barriers, Vietnamese coffee companies also face technical barriers including strict quality controls.

Some markets require higher standards than 98 percent of Vietnamese coffee exports can meet. Therefore, to access these markets, Vietnamese coffee companies must improve coffee quality via improvements in seedlings and cultivation, care, preservation and processing methods, said Vicofa President Luong Van Tu.

A recent survey by the Vietnam Rural Industries Research and Development Institute also shows that more than 100 companies are currently involved in production, trading, import and export of coffee, with most of them being located in Ho Chi Minh City and Central Highlands. However, only 1.39 percent of which are high-quality coffee producers and exporters.

The government has incentive policies to improve competitiveness for domestic coffee companies, for example, coffee tax exemptions or reductions and preferential loans for new coffee investment projects.

General Director of the Thai Hoa Group Nguyen Van An said, “Setting up a most modern coffee freeze-drier chain could cost the same as building a new coffee plant. Therefore, domestic coffee companies can hardly implement such investment without financial support.”


Quynh Nga & Lan Anh