Export Of Coffee In Vietnam

Vietnam has risen to be in the top countries of the world in the production of a variety of agricultural products, led by rice, coffee, and followed by pepper, rubber, cashew, rubber, etc. Besides, there are also the rich potential of medicinaland rare production of tropical forests, rivers, mangrove areas, and over 3000 km of coastal warm water and many kinds of seafood. Coffee is considered to be the most typical agricultural product in the process of heading out to the world of Vietnam’s economy. Vietnam approached with coffee lately in comparison to other countries (to be commercialized in 20th century), and coffee were planted in limited areas only at that time. Nowadays, the coffee growing areas have been expanded to nearly half a million hectares. Vietnam’s export of coffee has met many successes and our country has also been regarded as one of world’s leading coffee exporters. However, Vietnam’s coffee industry still has to face many difficulties and challenges from both domestic and foreign. This report, with the purpose of providing information for readers to see a big picture on the export of coffee in our country, is divided into three main parts. The first part discusses the situation of Vietnam’s coffee production and export. The second part deals with the position of Vietnam’s coffee on the international market. The last part indicates the future path of Vietnam’s coffee industries to boost our country’s economy.

Discussion of findings

The situation of production and export of coffee in Vietnam

In recent years, coffee is one of the most important agricultural export commodities of Vietnam, with an annual income of 400 to 600 million USD. Thus, it plays a crucial role towards the national economy, brings more foreign currency for the country. Besides, producing and exporting coffee contribute significantly to strengthening and developing the trade and economic relations between Vietnam and other countries.

Vietnamese coffee is currently available on every continent such as North America, Western Europe, Eastern Europe, Australia, South Asia, North Asia, and in more than 80 countries such as U.S, Japan and Europe (Germany, Italy, and Belgium), etc. In addition to this, the quality of Vietnamese coffee is also recognized and highly appreciated by international market.

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The State always considered coffee as one of the major export items of agriculture in particular and our country in general. After the national liberation in 1975, the area of coffee has increased from a few tens of thousands to nearly 300 thousand hectares. This creates a strong foundation for the growth of export coffee. Furthermore, in Vietnam, the amount of coffee is very large and potential; however most of them are not exploited efficiently. Therefore, the coffee industry needs to have specific solutions to maximize this potential.

a. The production:

Coffee was introduced to Vietnam for a long time and has been commercialized since 1888. Because of climatic conditions and suitable ground, it has been developing on a large scale, and creating good quality seeds that are similar to the products of other large producers and exporters of coffee over the world. According to the General Statistics Office and the coffee industry, the production was increasing from year to year:

In recent years, coffee is being expanded area in Tay Nguyen, Dong Nam Bo, etc, which are the regions mainly planting Robusta coffee. Additionally, Arabica coffee is also developed in several provinces such as Son La, Lai Chau, Yen Bai, Ha Giang, Tuyen Quang.

b. The export:

As a result of increasing the production, the export of coffee also is enhancing annually in both quantity and quality. Besides, the average export prices have been rising significantly, despite the changes of international coffee market. Nevertheless, the amount of foreign currency decreased hundreds of millions of dollars.

The position of Vietnamese coffee in the international arena

According to the latest report of the International Coffee Organization (ICO), Vietnam has just overcome Brazil to become the largest coffee exporter in the world. In 1997, Vietnam was in the top four of the largest coffee exporting countries, along with Brazil, Colombia and Mexico; amazingly, after 15 years, Viet Nam has been ranked number one in the world.

In the first six months of this year, Vietnam has exported 2.5 billion dollars of coffee, growing by 25% compared to the same period last year, and more than 13% of Brazil. This leads Vietnam to getting the number one of the world’s coffee exporter, which always belonged to Brazil over the past decade. The upsurge of coffee was evaluated as a miracle of Vietnam’s economy in recent years. Coffee industry has contributed significantly to the economy of Vietnam, becoming the second largest agricultural export of Vietnam, accounting for about 3% of GDP, which provides livelihood to more than 2.5 million people.

However, there are many ideas indicating that Vietnam reached the number one of coffee exporters because of exporting much more products than Brazil at that time. Indeed, in recent 11 years, while our growth rate was at 5.5% per year and we gained only 1.26 million tons by exporting, Brazil’s pace was 5, 8% per year and they exported 1.8 million tons. In such conditions, although the export volume of Brazil as well as their prices has slowed down in recent months, while our export volume and our prices have increased sharply; the distance between us and Brazil is still very large. Therefore, it is a really hard challenge for us to maintain the No.1 position.

The path to future

Recent statistics gave out by the Ministry of Agriculture and Rural Development shows that, Vietnamese agricultural trade surplus is $ 8.2 billion with a total export value of agriculture, forestry and fisheries is estimated at $ 22.6 billion from January to November this year. This is a significant increase of 30.6% over the same period last year. Normally, having trade surplus is considered as a positive balance of trade.

To be more specific, the top 3 are seafood exports ($ 5.6 billion), rice exports ($ 3.5 billion), and coffee exports (exceeded $ 3 billion for the first time). Coffee rises 37.7% in volume and 32.7% in value over the same period last year. Besides, FAO statistics show that in this decade we have exported to the world market nearly 10 million tons of coffee, earning $ 60 billion in total.

Obviously, exporting coffee brings about a lot of foreign currency to our country and proves to be a promising industry, creating jobs for more than 2.5 people.

There is no denial that coffee sector holds an important position in the economy of our country.

Nevertheless, the satisfactory results could not fix the weakness of the domestic market: international enterprises with the FDI are crowding out domestic enterprises. In fact, 60-70% exported coffee belongs to firms with FDI. Although we export a large amount of coffee, its quality is not quite high. Therefore, to improve the value for Vietnamese coffee as well as increase budget revenues, the Government encourages FDI in high processing technology. However, they are not allowed to purchase raw material from farmers. In response to these regulations, in the Vietnam’s coffee capital Tay Nguyen, the authority has preferential policies for FDI. The MNGs buy raw materials, coffee beans through agent systems, Domestic Enterprises Ltd., then carry out speculative sorting and exporting. Instead of purchasing from export firms, they buy directly from our supply, this will push domestic firms to the weaker position in the long run and MNGs is likely to monopolize our materials supply, not to mention the fact that it reduces tax revenues of our country. They have big advantages like financially stable, smaller bank loans (due to interest rate difference), hundreds-of-year experience, and large market.

To overcome difficulties for domestic firms, market analyzers agree that the relevant agencies should provide synchronization solutions promoting development in the coffee value: technological innovation, processing equipment. The state quality standards must be in accordance with international standards. Improving product quality according to the requirements of the market is also essential. If successful, the coffee industry will bring $ 20 billion / year, instead of the current $ 3 billion.

Moreover, the businesses themselves have to change in competitive business thinking, increase the quality of coffee towards global value, utilize more effective marketing campaigns,…

Lastly, loan is always the first and foremost conditions to production companies, Central bank should have capital incentives for enterprises to help them buy materials at the beginning. Especially, companies need to continue borrowing foreign currency, reducing the pressure to compete with FDI, because FDI loans USD with interest rates ranging from 3.5 to 4.5% / year, while domestic enterprises loan at very high interest rates. (http://www.baomoi.com/Bai-5-Ca-phe-truoc-nguy-co-bi-doc-chiem-vung-nhien-lieu/45/9749577.epi)

3. Conclusion

Coffee remains the key agricultural export commodity of our country’s economy on the world market in recent years. Thanks to the efforts of the coffee industries in Vietnam to increase production and export, our country is among the biggest coffee exporter of the world. However, there are still much work have to be done, and difficulties which need to be solved, so that Vietnam can maintain and improve that position in the future.

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