The Viet Nam Coffee and Cacao Association (Vicofa) proposed to the state that it launches credit support for the local coffee firms competing with foreign companies. — VNS Photo

HA NOI (Biz Hub) — The Viet Nam Coffee and Cacao Association (Vicofa) proposed to the state that it launches credit support for the local coffee firms competing with foreign companies.

The association said that local enterprises must pay interest rates of between 6.5 per cent and 7 per cent per year for their banking loans in Vietnamese đồng while foreign enterprises could get loans in United States dollars from foreign banks with a maximum interest rate of 3 per cent per year.

Meanwhile, according to free trade agreements signed by Viet Nam and its foreign partners, foreign direct investment groups have been permitted to establish companies processing, purchasing and exporting coffee beans.

Therefore, the local firms are facing strong competition with foreign firms in purchasing and exporting coffee beans on the local coffee market, the association said, leading to the domestic market being dominated by foreign companies.

Nguyen Nam Hai, Vicofa deputy chairman, said in recent years, large foreign companies have dominated the domestic market in purchasing material of coffee because they have had funds available at cheap rates from foreign banks converted to Vietnamese đồng to buy material on the domestic market, while local firms were unable to do that, reported the Dien dan Doanh nghiep newspaper.

In recent years, foreign companies have purchased 60 per cent to 70 per cent of the total coffee output in Viet Nam.

A representative of Coffee Company 706, a member of the Viet Nam Coffee Corporation, said the company must borrow commercial capital with high interest rate to improve coffee trees so the company has been difficulty to compete with foreign coffee companies.

The coffee enterprises have proposed to the government that it establish the Viet Nam Coffee Development Fund for supporting coffee production, business and exports to local firms as other countries such as Brazil, Colombia and India are already doing that, the association said.

In fact, the establishment of such a fund was promoted since early this year and the fund was expected to come into operation in 2017. The fund was scheduled to collect US$2 per tonne of export coffee.

However, some experts said the fund could not meet the high demand on capital for local enterprises.

The local firms also expect the State to create favourable conditions for them in acquiring loans from the credit package of VND120 trillion with an interest rate of 6.5 per cent per year because they still have difficulty in meeting the requirements to procure loans. — VNS