Cashew association takes flak for "sneaky' proposal

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Workers process cashew nuts at a factory in the southern province of Binh Phuoc

A proposal by the Vietnam Cashew Association to boost export quality has ignited controversy with many members saying it is a backhanded, sneaky effort by a few big companies to push smaller players out of business.

The proposal, presented by leaders of the industry group at a meeting last month with the Ministry of Agriculture and Rural Development, says export licenses should only be given to businesses with an output capacity of at least 2,500 tons a year. Cashew exports should also be required to meet global food quality and safety standards, it says.

The association had earlier said Vietnam's cashew exports stagnated between October last year and the first quarter of 2012.

According to the agriculture ministry, Vietnam has exported 203,000 tons of cashew worth US$1.365 billion so far this year, which is a 26.4 percent increase in volume, year-on-year, but a mere 2 percent increase in value due to price drops.

Nguyen Duc Thanh, vice chairman of the association, said that a number of small businesses are exporting at very low prices and low quality, causing difficulties to major exporters and damaging the reputation of the whole sector.

The ministry has agreed with the new plan, saying in a statement that the association should start drafting specific steps to implement it.

Many association members, however, are enraged that the proposal was made behind their backs. It was only when the ministry issued a statement that they knew of it.

Le Quang Luyen, chairman of Phuc An Production and Commerce Company in the southern province of Binh Phuoc, said, "I completely had no idea."

Luyen said he supported any plans to upgrade quality, but it should be done in a "transparent and democratic manner, not in such a sneaky way."

The members are also angry because they find that the proposal is making "groundless" accusations against small businesses. It is also likely to cause supply-and-demand crises, they add.

Luyen told Vietweek the capacity requirement was "unreasonable" as the sector is currently short of material, having to import half of the raw cashew nuts it needs every year.

He said a new factory, which can meet the proposed requirements, would cost around VND90 billion ($4.32 million). Many businesses cannot afford that and the investment would be a waste given the low supply of raw material, he said.

The country will need to plant a further one million hectares of cashew if all businesses are to meet the required capacity, he said.

He alleged that the plan aims to benefit a small number of big businesses by getting rid of small and medium ones, noting that any discussion should have included them if it was simply about raising the quality of the sector as a whole.

Luyen said the plan can push 75 percent of the current 300 cashew exporters in Vietnam out of the market.

Most businesses in Binh Phuoc, the main cashew producing province in the country, are small. Without them, the remaining few exporters may collude and force farmers to lower their prices, he warned.

Tuoi Tre newspaper also cited small cashew businesses in Binh Phuoc criticizing the plan saying it was pushing them into a corner.

Truong Nhu Chau said his Ngoc Chau Company has been exporting legally with a license, following production procedures set by ministry, and satisfying customers' demand.

Thus there is no reason that the company is now asked to leave the market, Chau said.

Do Tan, director of Tan Toan Company, said his firm is small but has maintained good business relations with customers for more than 10 years.

Tan said many businesses in the list of top 20 exporters were the ones receiving complaints and having their shipments returned.

Some big businesses agreed.

"It's not right to say that small businesses are affecting the sector," Vu Thai Son, board chairman of Long Son Company, Vietnam's largest cashew exporter based in Ho Chi Minh City, told Vietweek.

He said many member companies are currently weak, and it's not just the small ones' fault.

"Some big businesses are in debt, so it's totally unreasonable if the association is going to use the new requirements to remove small businesses."

Son, who is a member of the association's board, said he was at the meeting with the ministry and he had expressed his disapproval, but the proposal still went through.

Ho Ngoc Cam, former chairman of the association, also said that the size of the businesses in the sector has never decided their quality, in his experience.

Cam said some leading businesses, which he did not name, had once failed to deliver hundreds of containers to their customers, but many small ones were able to maintain stable operations.

He said the problem lies with the leaders of the association, who have let several companies run their business their own way.

"All the member companies have to agree to certain selling and buying prices to keep the market consistent," Cam told Tuoi Tre.

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