Cacao sector runs before it can walk

Monday, Jul 01, 2013 09:38

The recent destruction of some cacao farms by farmers in some central and Central Highland provinces due to low profits shows that in developing the cacao sector, haste indeed makes waste.—Photo daktra

by Le Hung Vong

(Biz Hub)—The recent destruction of some cacao farms by farmers in some central and Central Highland provinces due to low profits shows that in developing the cacao sector, haste indeed makes waste.

According to the Ministry of Agriculture and Rural Development, the cacao industry has been growing at breakneck speed.

In 2003 the area under cacao was just 3,000 ha, but by the end of 2011 it has jumped to 20,100 ha and annual production of 5,500 tonnes.

By the end of last year the area rose further to 25,000ha. It is expected to double by 2020 when output will be 52,000 tonnes.

Cacao trees are mainly grown in the Cuu Long (Mekong) Delta, the south-eastern region, and the Central Highlands.

Nguyen Quang Binh, director of HCM City-based Chanh Tinh Anh Co. Ltd., said cacao trees grown in plantations along with other kinds of trees always have low yields of around 600kg per hectare per year.

The area under such intercrop is around 18,000ha, and includes cacao plantations under coconut trees in the Mekong province of Ben Tre and under cashew trees in the southern province of Binh Phuoc.

Only a few places have the optimum yield of two tonnes per year – like the Thang Muoi Coffee – Cocoa Co. in the Central Highlands Province of Dak Lak.

In other provinces farmers have been chopping down cacao trees because of their low productivity, Binh said.

He explained that in the Central Highlands and south-eastern provinces, cacao is a "newcomer" compared to crops like coffee, pepper, and cashew, which have dominated the export markets in recent years.

That is also a reason why cacao trees are grown in infertile areas that lack water.

But because of this, it takes the cacao trees a longer time to yield the first crop and productivity is very low, making it less profitable compared with other crops.

A farmer can earn only a fifth of the income obtained from robusta coffee, which yields an average of three tonnes of beans priced at VND38,000 per kilo.

Binh said the gap with pepper is even wider. With a tonne of black pepper priced at VND120 million and a hectare yielding two tonnes, revenues from a hectare of cacao are just a tenth.

Besides, the cocoa beans must undergo a fermentation process that requires skilled workers.

"Many international cup-tasters said the intrinsic quality of Viet Nam cocoa beans is very good," Binh told Viet Nam News.

"However, a number of trading houses just look at the prices."

Under these circumstances, farmers benefit little from cocoa, only foreign companies do.

According to the industry, semi-processed cocoa fetches only a 15 per cent profit, but this skyrockets to 400 per cent with products like cocoa powder, candy, and chocolate.

Again, the windfall profits go mostly to FDI companies, with local companies merely playing an intermediary role as buyers.

The market comprises virtually only of foreign firms who compete with each other to buy cocoa.

Binh said international cocoa processors were hoping the Vietnamese industry would develop quickly and become a stable supplier.

"It is the hasty preparation and consultancy to quickly develop the sector that has led to the current pass, leading many growers to destroy their cacao trees," he said.

Travel Life compensates stranded travellers

Travel Life has finally agreed on the compensation it will pay to hundreds of Vietnamese tourists it had abandoned in Bangkok earlier this month.

After heated discussions with them on June 24, the director of the HCM City-based tour operator, Nguyen Thi Kim Khanh, agreed to pay VND2.5 million to each stranded traveller next month.

Khanh had first offered VND2 million while the customers asked for much more.

"I spent VND23 million for my six-member family in Thailand but now receive compensation of VND12 million," Tuong of Tan Binh District told online newspaper VnExpress.

Huong of Binh Duong Province said she had to sleep in the basement of a building used as a garage. "Though we had paid for a tour, we had to remain in a bus and sleep in a garage. This compensation is unsatisfactory."

Huong said: "We had a big mistake and asked for your forgiveness. We have made our best efforts to pay compensation."

Her firm had accepted bookings and payment from 701 people, who were among 3,000 Herbalife agents travelling to Bangkok for a company seminar and tour scheduled June 12 to 18.

The package included flights, hotels, and tour arrangements.

But when they arrived in Bangkok, Travel Life's local partner Thai 2020 refused to offer them any of the services as Travel Life had paid only 30 per cent of the contracted rates.

The Viet Nam National Administration of Tourism has announced it will strengthen oversight of all travel firms.

Nguyen Huu Tho, chairman of the Viet Nam Tourism Association, said the mess had created a negative impression about the country's tourism industry among the global community.

Vo Anh Tai, chairman of the HCM City Travel Association and general director of Saigontourist, said bogus travel firms without licences were mushrooming.

He urged the authorities to severely punish travel companies that cheat customers.

Firms target dollar loans from foreign banks

With interest rates on dong loans being higher and local banks having impossible conditions, many local firms have turned to foreign banks for dollar loans.

The manager of seafood processing Ut Xi JSC said that most bank loans provided to Ut Xi were in foreign currencies and at interest rates of 4 to 5 per cent, compared with 10-12 per cent for dong loans.

Brett Krause, managing director of Citibank in Viet Nam, had been quoted by VIR newspaper as saying that policies to de-dollarise the economy and restrict gold purchase had been very successful.

But they affected bank lending in foreign currencies to import-export companies, making them to look for loans from foreign banks.

Foreign currency loans by banks have reduced sharply since the State Bank of Viet Nam issued a circular stipulating that a firm can only get a foreign currency loan if it can repay using revenues from business activities.

In the first five months of this year banks' outstanding dong credit rose by 5.48 per cent while the corresponding figure for foreign currencies fell by 8.41 per cent.

Bankers have said the central bank should consider providing foreign currencies to firms in need, especially importers.

It is the narrowed gap between interest rates on dong and foreign-currency loans since the dong deposit cap was reduced to 7.5 per cent that has exerted pressure on the exchange rate because many people have resorted to deposits in foreign currencies.

To stabilise the exchange rate and reduce the pressure on companies in need of foreign exchange, the SBV should further lower deposit interest rates on the greenback.

According to SBV Governor Nguyen Van Binh, the foreign currency market and foreign exchange rates remain stable. Any fluctuation would not exceed 2 per cent annually, he said.

The interest rate cap on foreign-currency deposits would certainly be changed, but after careful consideration, he said. — VNS

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