Foreign rivals are leaving many local coffee processors and exporters crying for help from local authorities.

Vietnam’s Coffee and Cocoa Association (Vicofa) recently asked municipal and provincial departments of industry and trade, and investment and planning not to allow foreign firms to establish coffee-purchasing networks in their localities.

The move came after Vietnam’s 20 leading local coffee exporters, which export 80 per cent of local coffee, asked the Vicofa for urgent help. They cited foreign rivals allegedly illegally purchasing coffee from farmers. This had driven them into losses due to coffee material shortages.

Vicofa Chairman Luong Van Tu cited Decree 23/2007/ND-CP dated February 12, 2007 on detailing the commercial law regarding goods purchase and sale activities or goods purchase and sale related activities of foreign-invested enterprises in Vietnam.

He also pointed to the Ministry of Industry and Trade’s Circular 09/2007/TT-BTM dated July 17, 2007 on guiding the implementation of this decree, as saying that foreign firms were entitled to export coffee, not establishing coffee purchasing networks.

Nguyen Nam Hai, Chairman of Vietnam Super Intendance and Inspection Company, said about 10 foreign coffee firms had established branches in coffee-planting provinces like Dak Lak, Dak Nong, Lam Dong and Gia Lai to illegally purchase 60 per cent of Vietnam’s coffee from farmers.

“Previously, foreign firms purchased coffee via local firms,” Hai said.

However, Branch Manager of Singaporean-backed Olam International Limited in Dak Lak’s Ban Me Thuot City Le Tran Anh Dung told VIR that Vicofa’s move was just to “please” local exporters, which had fewer advantages in terms of capital to buy coffee at high prices from farmers.

“Foreign firms like Olam will not be influenced. All of them have certificates granted by local authorities to directly process and purchase coffee from coffee growers,” Dung said.

But, he said some firms had their business registered, for example, in Dong Nai province but opened their branches in coffee planting localities like Lam Dong to purchase and process coffee without any business certificate granted by Lam Dong’s authorities. “This means that such firms are violating the law,” he said.

However, he noted that these firms would not violate the law if Lam Dong coffee growers directly sold their products to the firms’ factories in Lam Dong, but the sale invoices were prescribed with the name of buyers of the firms’ headquarters in Dong Nai.

But, Tu said that foreign firms’ policy was going against the law and would gradually wipe out local firms.

Dao Ngoc Lam, General Director of Ho Chi Minh City-based Hoa Dao Trading Joint Stock Company, which is trading in farm produce, said foreign firms had big advantages regarding capital, especially foreign currency, and sought bank loans at preferential lending rates.

“Moreover, given the recent 9.3 per cent devaluation of the dong, foreign firms will be stronger than local firms in purchasing coffee,” Lam said.

Vietnam has 146 coffee exporters and is the world’s second largest coffee exporter.