Illustrative image (Source: VNA)
Hanoi (VNA) – The Vietnam Coffee and Cacao Association (Vicofa) has proposed to the State that it launch credit support for local coffee firms competing with foreign companies.

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

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

Therefore, 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 the dong 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 to 70 percent of the total coffee output in Vietnam.

A representative of Coffee Company 706, a member of the Vietnam Coffee Corporation, said the company must borrow commercial capital at high interest to improve coffee trees so the company has difficulty competing with foreign coffee companies.

The coffee enterprises have proposed to the government that it establish the Vietnam Coffee Development Fund to support coffee production and exports, as other countries such as Brazil, Colombia and India are already doing, the association said.

In fact, such a fund was expected to go into operation in 2017. The fund was scheduled to collect 2 USD per tonne of export coffee to finance its operation.

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