Coffee insurance fund makes it more difficult to export coffee?

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VietStock FI English - 72 month(s) ago 8 readings

Under the new regulations, from October 2012, every member of the Vietnam Cocoa and Coffee Association (Vicofa) would have to pay 2 dollars for every ton of coffee exported. The money would go to the coffee insurance fund.

The information has raised worries among Vietnamese coffee exporters. They said that if the fee is only charged on Vietnamese enterprises, not on foreign ones, which collect and export 50 percent of total coffee output, this would create the unfair treatment.

At a recent meeting of the Ministry of Agriculture and Rural Development (MARD), Luong Van Tu, Vicofa’s Chair said that once the coffee export support fund is set up, Vicofa will have the way to create a budget for the fund.

The State will not be required to spend money for the fund. The only thing it needs to do is to set up a mechanism that allows Vicofa to collect money from enterprises to maintain the fund.

If 2 dollars are mobilized to the fund from every one ton of coffee exported, Vicofa would collect one million dollars a year, supposed that Vicofa’s members export 600,000 tons of coffee a year out of the total 1.2 million tons of exports.

However, a question has been raised that how to use the fund in the most effective way.

Some experts have suggested that the fund should be used to support coffee exporters when the coffee prices go down. However, the support, if implemented, would be “just a grain of salt in the open sea,” which will not help push the prices up. Therefore, Tu has proposed MARD to rename the fund as the coffee insurance fund which would give the support to both the production and export, not only the export. Also according to Tu, the money should be used to help the re-cultivation of old coffee plants.

Tu has emphasized that if Vietnam does not collect fee to have money for the re-investment, it would fall to the fourth or fifth grade in the next 10 years in terms of coffee production and export.

If farmers do not have money for re-investment, export companies would not have coffee to export. Therefore, it is necessary to reserve 50-70 percent of the fund to assist enterprises and farmers to re-cultivate old plants. Meanwhile, the other 30 percent would be sued to prop up the loan interest rates to help exporters to collect materials for storage. The remaining money would be spent on trade promotion campaigns.

The insurance premium collection should have been started since January 1, 2012. However, as the proposal has been facing the strong opposition from many enterprises, Vicofa has decided to delay the collection time to October 1, 2012.

A lot of exporters have voiced their complaints that they have been facing too many difficulties in the last few years; therefore, the fee collection would put a heavy burden on them. Meanwhile, it would be unfair if foreign enterprises are not charged the fee, though they also do business in Vietnam and earn profit in the country.

The exporters have warned the watchdog agencies that foreign enterprises have big financial capability, while they can borrow money in foreign countries at the interest rates much lower than the rates domestic enterprises have to bear. Besides, they also have advantages in terms of large consumption markets. Therefore, the exemption from the fee would give one more advantage to them, helping them block domestic enterprises.

Coffee exporters are also moaning about the new decision which puts coffee export into the list of the conditional business fields. MARD and the Ministry of Industry and Trade are joining forces to draw up a legal document, attempting to set up stricter regulations on exporters.

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