Vietnam’s coffee industry rumored to be collapsing

VietNamNet Bridge – The rumor that the Vietnamese coffee is nearly falling down has been spread out through the world’s forums. There is no smoke without fire.

coffee industry, collapse, vicofa

Do Ha Nam, Deputy Chair of the Vietnam Coffee and Cocoa Association (Vicofa), said Vietnamese enterprises have been on the tenterhooks these days because of a series of problems relating to the VAT frauds.

However, he said, more worryingly--the news about the current situation of the coffee enterprises has been spread out all over the world. Especially, a rumor has it that the Vietnamese coffee industry nearly collapsed.

Nam said Vicofa these days has a lot of meetings with banks and foreign companies which come to learn more about the fate of the Vietnamese coffee enterprises, rumored to be at a point of death due to the high interest rates and tax problems.

Nam, while saying that this is just a rumor, admitted that Vietnamese enterprises are facing big difficulties.

The story originated from the fact that a lot of companies complain they don’t have working capital because of the delay in the VAT refund.

As the companies bought materials from the intermediaries, which were the “bogus companies,” or the ones who have disappeared, they cannot prove their transactions. As a result, they cannot get tax refund, even though they are seriously lacking working capital.

Since July 1, 2013, taxation bodies and enterprises have been following a new tax refund procedure set by the Ministry of Finance. Under the new mechanism, enterprises would get tax refund only when the taxation bodies check enough lawful invoices. Meanwhile, it takes months to fulfill that work.

Nam said he fears that if the current problems cannot be settled, no Vietnamese enterprise would join the market any more.

Also according to Nam, in late July 2013, ECF sent a letter to Vietnamese competent agencies, requesting to take probe over the tax frauds in coffee trade. ECF then requested Vietnam to settle the problems before the new coffee crop, so that the European importers can plan their business for the 2013-2014 season.

Vietnamese enterprises themselves fear that Vietnam may lose the markets just because of the VAT frauds and the difficulties in tax refund. While the coffee exports in the world have been increasing, the Vietnamese have been decreasing.

In 2012-2013, Vietnam’s coffee export saw the decreases in both export volume and value. It exported 1.4 million tons, down by 23.7 percent, worth $2.8 billion, down by 22.8 percent in comparison with the same period of the last year.

Previously, Vietnam exported 110,000-120,000 tons a month, but the figure has decreased to 80,000-90,000 tons a month.

“If the VAT refund problems cannot be settled, Vietnam’s coffee products will not be able to go abroad. If so, Vietnam would give the golden opportunities to Indonesia and Brazil to expand their market share,” said Nguyen Quang Binh, Director of Chanh Tinh Anh Company.

“In the immediate time, 400,000 tons of Brazilian robusta coffee and 100,000 tons of Indonesian coffee would be put into the market, and Vietnam may lose the bigger market share,” Binh warned.

Compiled by K. Chi

coffee industry, collapse, vicofa